Correlation Between Leader Electronics and Microelectronics
Can any of the company-specific risk be diversified away by investing in both Leader Electronics and Microelectronics 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 Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leader Electronics and Microelectronics Technology, you can compare the effects of market volatilities on Leader Electronics and Microelectronics 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 Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and Microelectronics.
Diversification Opportunities for Leader Electronics and Microelectronics
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Leader and Microelectronics is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Microelectronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microelectronics Tec 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 Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microelectronics Tec has no effect on the direction of Leader Electronics i.e., Leader Electronics and Microelectronics go up and down completely randomly.
Pair Corralation between Leader Electronics and Microelectronics
Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Leader Electronics is 2.33 times less risky than Microelectronics. The stock trades about -0.15 of its potential returns per unit of risk. The Microelectronics Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,895 in Microelectronics Technology on August 30, 2024 and sell it today you would earn a total of 250.00 from holding Microelectronics Technology or generate 8.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Leader Electronics vs. Microelectronics Technology
Performance |
| Timeline |
| Leader Electronics |
| Microelectronics Tec |
Leader Electronics and Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leader Electronics and Microelectronics
The main advantage of trading using opposite Leader Electronics and Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leader Electronics position performs unexpectedly, Microelectronics 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 Microelectronics will offset losses from the drop in Microelectronics' long position.| Leader Electronics vs. Yulon Motor Co | Leader Electronics vs. Far Eastern Department | Leader Electronics vs. China Steel Corp | Leader Electronics vs. Chang Hwa Commercial |
| Microelectronics vs. D Link Corp | Microelectronics vs. Accton Technology Corp | Microelectronics vs. Macronix International Co | Microelectronics vs. Ritek Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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