Correlation Between Leader Electronics and China Petrochemical
Can any of the company-specific risk be diversified away by investing in both Leader Electronics and China Petrochemical 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 Leader Electronics and China Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leader Electronics and China Petrochemical Development, you can compare the effects of market volatilities on Leader Electronics and China Petrochemical 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 Leader Electronics with a short position of China Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and China Petrochemical.
Diversification Opportunities for Leader Electronics and China Petrochemical
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leader and China is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and China Petrochemical Developmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petrochemical and Leader Electronics 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 Leader Electronics are associated (or correlated) with China Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petrochemical has no effect on the direction of Leader Electronics i.e., Leader Electronics and China Petrochemical go up and down completely randomly.
Pair Corralation between Leader Electronics and China Petrochemical
Assuming the 90 days trading horizon Leader Electronics is expected to generate 2.17 times more return on investment than China Petrochemical. However, Leader Electronics is 2.17 times more volatile than China Petrochemical Development. It trades about 0.05 of its potential returns per unit of risk. China Petrochemical Development is currently generating about -0.03 per unit of risk. If you would invest 1,000.00 in Leader Electronics on September 12, 2024 and sell it today you would earn a total of 650.00 from holding Leader Electronics or generate 65.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leader Electronics vs. China Petrochemical Developmen
Performance |
| Timeline |
| Leader Electronics |
| China Petrochemical |
Leader Electronics and China Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leader Electronics and China Petrochemical
The main advantage of trading using opposite Leader Electronics and China Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leader Electronics position performs unexpectedly, China Petrochemical 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 China Petrochemical will offset losses from the drop in China Petrochemical's long position.| 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 |
| China Petrochemical vs. Tainan Spinning Co | China Petrochemical vs. Lealea Enterprise Co | China Petrochemical vs. Ruentex Development Co | China Petrochemical vs. WiseChip Semiconductor |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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