Correlation Between ASRock and Leadtek Research
Can any of the company-specific risk be diversified away by investing in both ASRock and Leadtek Research 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 ASRock and Leadtek Research into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASRock Inc and Leadtek Research, you can compare the effects of market volatilities on ASRock and Leadtek Research 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 ASRock with a short position of Leadtek Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASRock and Leadtek Research.
Diversification Opportunities for ASRock and Leadtek Research
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ASRock and Leadtek is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding ASRock Inc and Leadtek Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leadtek Research and ASRock 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 ASRock Inc are associated (or correlated) with Leadtek Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leadtek Research has no effect on the direction of ASRock i.e., ASRock and Leadtek Research go up and down completely randomly.
Pair Corralation between ASRock and Leadtek Research
Assuming the 90 days trading horizon ASRock Inc is expected to generate 0.76 times more return on investment than Leadtek Research. However, ASRock Inc is 1.31 times less risky than Leadtek Research. It trades about 0.22 of its potential returns per unit of risk. Leadtek Research is currently generating about -0.21 per unit of risk. If you would invest 20,350 in ASRock Inc on September 1, 2024 and sell it today you would earn a total of 3,250 from holding ASRock Inc or generate 15.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
ASRock Inc vs. Leadtek Research
Performance |
| Timeline |
| ASRock Inc |
| Leadtek Research |
ASRock and Leadtek Research Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASRock and Leadtek Research
The main advantage of trading using opposite ASRock and Leadtek Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASRock position performs unexpectedly, Leadtek Research 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 Leadtek Research will offset losses from the drop in Leadtek Research's long position.The idea behind ASRock Inc and Leadtek Research pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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