Correlation Between Solid State and Leader Electronics
Can any of the company-specific risk be diversified away by investing in both Solid State and Leader Electronics 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 Solid State and Leader Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solid State System and Leader Electronics, you can compare the effects of market volatilities on Solid State and Leader Electronics 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 Solid State with a short position of Leader Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solid State and Leader Electronics.
Diversification Opportunities for Solid State and Leader Electronics
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Solid and Leader is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Solid State System and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and Solid State 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 Solid State System are associated (or correlated) with Leader Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leader Electronics has no effect on the direction of Solid State i.e., Solid State and Leader Electronics go up and down completely randomly.
Pair Corralation between Solid State and Leader Electronics
Assuming the 90 days trading horizon Solid State System is expected to generate 15.11 times more return on investment than Leader Electronics. However, Solid State is 15.11 times more volatile than Leader Electronics. It trades about 0.04 of its potential returns per unit of risk. Leader Electronics is currently generating about 0.05 per unit of risk. If you would invest 2,649 in Solid State System on August 30, 2024 and sell it today you would lose (69.00) from holding Solid State System or give up 2.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solid State System vs. Leader Electronics
Performance |
| Timeline |
| Solid State System |
| Leader Electronics |
Solid State and Leader Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solid State and Leader Electronics
The main advantage of trading using opposite Solid State and Leader Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solid State position performs unexpectedly, Leader Electronics 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 Leader Electronics will offset losses from the drop in Leader Electronics' long position.| Solid State vs. Taiwan Semiconductor Manufacturing | Solid State vs. MediaTek | Solid State vs. United Microelectronics | Solid State vs. Novatek Microelectronics Corp |
| Leader Electronics vs. Yulon Motor Co | Leader Electronics vs. Far Eastern Department | Leader Electronics vs. China Steel Corp | Leader Electronics vs. Chang Hwa Commercial |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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