Correlation Between Leader Electronics and FineTek
Can any of the company-specific risk be diversified away by investing in both Leader Electronics and FineTek 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 FineTek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leader Electronics and FineTek Co, you can compare the effects of market volatilities on Leader Electronics and FineTek 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 FineTek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and FineTek.
Diversification Opportunities for Leader Electronics and FineTek
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leader and FineTek is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and FineTek Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FineTek 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 FineTek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FineTek has no effect on the direction of Leader Electronics i.e., Leader Electronics and FineTek go up and down completely randomly.
Pair Corralation between Leader Electronics and FineTek
Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the FineTek. But the stock apears to be less risky and, when comparing its historical volatility, Leader Electronics is 1.41 times less risky than FineTek. The stock trades about -0.02 of its potential returns per unit of risk. The FineTek Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 9,000 in FineTek Co on September 4, 2024 and sell it today you would earn a total of 5,550 from holding FineTek Co or generate 61.67% 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. FineTek Co
Performance |
| Timeline |
| Leader Electronics |
| FineTek |
Leader Electronics and FineTek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leader Electronics and FineTek
The main advantage of trading using opposite Leader Electronics and FineTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leader Electronics position performs unexpectedly, FineTek 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 FineTek will offset losses from the drop in FineTek's long position.| Leader Electronics vs. Altek Corp | Leader Electronics vs. Promise Technology | Leader Electronics vs. Edom Technology Co | Leader Electronics vs. Spirox Corp |
| FineTek vs. Integrated Service Technology | FineTek vs. WiseChip Semiconductor | FineTek vs. Novatek Microelectronics Corp | FineTek vs. Leader Electronics |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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