Correlation Between Leader Electronics and Formosa Electronic
Can any of the company-specific risk be diversified away by investing in both Leader Electronics and Formosa Electronic 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 Formosa Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leader Electronics and Formosa Electronic Industries, you can compare the effects of market volatilities on Leader Electronics and Formosa Electronic 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 Formosa Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and Formosa Electronic.
Diversification Opportunities for Leader Electronics and Formosa Electronic
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Leader and Formosa is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Formosa Electronic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Electronic 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 Formosa Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Electronic has no effect on the direction of Leader Electronics i.e., Leader Electronics and Formosa Electronic go up and down completely randomly.
Pair Corralation between Leader Electronics and Formosa Electronic
Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the Formosa Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Leader Electronics is 2.41 times less risky than Formosa Electronic. The stock trades about -0.15 of its potential returns per unit of risk. The Formosa Electronic Industries is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 3,450 in Formosa Electronic Industries on August 30, 2024 and sell it today you would earn a total of 1,170 from holding Formosa Electronic Industries or generate 33.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leader Electronics vs. Formosa Electronic Industries
Performance |
| Timeline |
| Leader Electronics |
| Formosa Electronic |
Leader Electronics and Formosa Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leader Electronics and Formosa Electronic
The main advantage of trading using opposite Leader Electronics and Formosa Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leader Electronics position performs unexpectedly, Formosa Electronic 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 Formosa Electronic will offset losses from the drop in Formosa Electronic's 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 |
| Formosa Electronic vs. Info Tek | Formosa Electronic vs. Gallant Precision Machining | Formosa Electronic vs. Walton Advanced Engineering | Formosa Electronic vs. Cheng Mei Materials |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |