Correlation Between Promise Technology and Leader Electronics
Can any of the company-specific risk be diversified away by investing in both Promise Technology and Leader Electronics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Promise Technology and Leader Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Promise Technology and Leader Electronics, you can compare the effects of market volatilities on Promise Technology and Leader Electronics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Promise Technology with a short position of Leader Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Promise Technology and Leader Electronics.
Diversification Opportunities for Promise Technology and Leader Electronics
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Promise and Leader is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Promise Technology and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and Promise Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Promise Technology are associated (or correlated) with Leader Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leader Electronics has no effect on the direction of Promise Technology i.e., Promise Technology and Leader Electronics go up and down completely randomly.
Pair Corralation between Promise Technology and Leader Electronics
Assuming the 90 days trading horizon Promise Technology is expected to under-perform the Leader Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Promise Technology is 1.61 times less risky than Leader Electronics. The stock trades about -0.29 of its potential returns per unit of risk. The Leader Electronics is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 1,760 in Leader Electronics on September 12, 2024 and sell it today you would lose (110.00) from holding Leader Electronics or give up 6.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Promise Technology vs. Leader Electronics
Performance |
| Timeline |
| Promise Technology |
| Leader Electronics |
Promise Technology and Leader Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Promise Technology and Leader Electronics
The main advantage of trading using opposite Promise Technology and Leader Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Promise Technology position performs unexpectedly, Leader Electronics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Leader Electronics will offset losses from the drop in Leader Electronics' long position.| Promise Technology vs. AU Optronics | Promise Technology vs. Innolux Corp | Promise Technology vs. Ruentex Development Co | Promise Technology vs. WiseChip Semiconductor |
| Leader Electronics vs. Yang Ming Marine | Leader Electronics vs. Wan Hai Lines | Leader Electronics vs. U Ming Marine Transport | Leader Electronics vs. Taiwan Navigation Co |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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