Correlation Between Leader Electronics and Excellence Optoelectronic
Can any of the company-specific risk be diversified away by investing in both Leader Electronics and Excellence Optoelectronic 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 Excellence Optoelectronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leader Electronics and Excellence Optoelectronic, you can compare the effects of market volatilities on Leader Electronics and Excellence Optoelectronic 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 Excellence Optoelectronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and Excellence Optoelectronic.
Diversification Opportunities for Leader Electronics and Excellence Optoelectronic
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Leader and Excellence is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic 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 Excellence Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellence Optoelectronic has no effect on the direction of Leader Electronics i.e., Leader Electronics and Excellence Optoelectronic go up and down completely randomly.
Pair Corralation between Leader Electronics and Excellence Optoelectronic
Assuming the 90 days trading horizon Leader Electronics is expected to generate 1.21 times more return on investment than Excellence Optoelectronic. However, Leader Electronics is 1.21 times more volatile than Excellence Optoelectronic. It trades about 0.02 of its potential returns per unit of risk. Excellence Optoelectronic is currently generating about 0.01 per unit of risk. If you would invest 1,450 in Leader Electronics on November 19, 2024 and sell it today you would earn a total of 95.00 from holding Leader Electronics or generate 6.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.38% |
| Values | Daily Returns |
Leader Electronics vs. Excellence Optoelectronic
Performance |
| Timeline |
| Leader Electronics |
| Excellence Optoelectronic |
Leader Electronics and Excellence Optoelectronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leader Electronics and Excellence Optoelectronic
The main advantage of trading using opposite Leader Electronics and Excellence Optoelectronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leader Electronics position performs unexpectedly, Excellence Optoelectronic 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 Excellence Optoelectronic will offset losses from the drop in Excellence Optoelectronic's long position.| Leader Electronics vs. Altek Corp | Leader Electronics vs. Promise Technology | Leader Electronics vs. Edom Technology Co | Leader Electronics vs. Spirox Corp |
| Excellence Optoelectronic vs. Hota Industrial Mfg | Excellence Optoelectronic vs. BizLink Holding | Excellence Optoelectronic vs. Tong Hsing Electronic | Excellence Optoelectronic vs. SDI 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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