Correlation Between Leader Electronics and Solar Applied
Can any of the company-specific risk be diversified away by investing in both Leader Electronics and Solar Applied 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 Solar Applied into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leader Electronics and Solar Applied Materials, you can compare the effects of market volatilities on Leader Electronics and Solar Applied 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 Solar Applied. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and Solar Applied.
Diversification Opportunities for Leader Electronics and Solar Applied
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Leader and Solar is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Solar Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Applied Materials 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 Solar Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Applied Materials has no effect on the direction of Leader Electronics i.e., Leader Electronics and Solar Applied go up and down completely randomly.
Pair Corralation between Leader Electronics and Solar Applied
Assuming the 90 days trading horizon Leader Electronics is expected to generate 1.1 times less return on investment than Solar Applied. In addition to that, Leader Electronics is 1.29 times more volatile than Solar Applied Materials. It trades about 0.05 of its total potential returns per unit of risk. Solar Applied Materials is currently generating about 0.07 per unit of volatility. If you would invest 3,161 in Solar Applied Materials on September 3, 2024 and sell it today you would earn a total of 2,789 from holding Solar Applied Materials or generate 88.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leader Electronics vs. Solar Applied Materials
Performance |
| Timeline |
| Leader Electronics |
| Solar Applied Materials |
Leader Electronics and Solar Applied Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leader Electronics and Solar Applied
The main advantage of trading using opposite Leader Electronics and Solar Applied positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leader Electronics position performs unexpectedly, Solar Applied 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 Solar Applied will offset losses from the drop in Solar Applied's long position.| Leader Electronics vs. Universal Microelectronics Co | Leader Electronics vs. AVerMedia Technologies | Leader Electronics vs. Symtek Automation Asia | Leader Electronics vs. WiseChip Semiconductor |
| Solar Applied vs. Catcher Technology Co | Solar Applied vs. Evergreen Steel Corp | Solar Applied vs. China Metal Products | Solar Applied vs. Chernan Metal Industrial |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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