Correlation Between Leader Electronics and Level Biotechnology
Can any of the company-specific risk be diversified away by investing in both Leader Electronics and Level Biotechnology 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 Level Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leader Electronics and Level Biotechnology, you can compare the effects of market volatilities on Leader Electronics and Level Biotechnology 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 Level Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and Level Biotechnology.
Diversification Opportunities for Leader Electronics and Level Biotechnology
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Leader and Level is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Level Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Level Biotechnology 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 Level Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Level Biotechnology has no effect on the direction of Leader Electronics i.e., Leader Electronics and Level Biotechnology go up and down completely randomly.
Pair Corralation between Leader Electronics and Level Biotechnology
Assuming the 90 days trading horizon Leader Electronics is expected to generate 3.03 times more return on investment than Level Biotechnology. However, Leader Electronics is 3.03 times more volatile than Level Biotechnology. It trades about 0.05 of its potential returns per unit of risk. Level Biotechnology is currently generating about 0.04 per unit of risk. If you would invest 1,005 in Leader Electronics on September 4, 2024 and sell it today you would earn a total of 640.00 from holding Leader Electronics or generate 63.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Leader Electronics vs. Level Biotechnology
Performance |
| Timeline |
| Leader Electronics |
| Level Biotechnology |
Leader Electronics and Level Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leader Electronics and Level Biotechnology
The main advantage of trading using opposite Leader Electronics and Level Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leader Electronics position performs unexpectedly, Level Biotechnology 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 Level Biotechnology will offset losses from the drop in Level Biotechnology's long position.| Leader Electronics vs. Altek Corp | Leader Electronics vs. Promise Technology | Leader Electronics vs. Edom Technology Co | Leader Electronics vs. Spirox Corp |
| Level Biotechnology vs. China Steel Corp | Level Biotechnology vs. Sheng Yu Steel | Level Biotechnology vs. U Ming Marine Transport | Level Biotechnology vs. Dadi Early Childhood Education |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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