Correlation Between Highlight Tech and Leader Electronics
Can any of the company-specific risk be diversified away by investing in both Highlight Tech 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 Highlight Tech and Leader Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Tech and Leader Electronics, you can compare the effects of market volatilities on Highlight Tech 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 Highlight Tech with a short position of Leader Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Tech and Leader Electronics.
Diversification Opportunities for Highlight Tech and Leader Electronics
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Highlight and Leader is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Tech and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and Highlight Tech 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 Highlight Tech 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 Highlight Tech i.e., Highlight Tech and Leader Electronics go up and down completely randomly.
Pair Corralation between Highlight Tech and Leader Electronics
Assuming the 90 days trading horizon Highlight Tech is expected to generate 1.11 times more return on investment than Leader Electronics. However, Highlight Tech is 1.11 times more volatile than Leader Electronics. It trades about 0.03 of its potential returns per unit of risk. Leader Electronics is currently generating about -0.03 per unit of risk. If you would invest 4,820 in Highlight Tech on September 3, 2024 and sell it today you would earn a total of 540.00 from holding Highlight Tech or generate 11.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Tech vs. Leader Electronics
Performance |
| Timeline |
| Highlight Tech |
| Leader Electronics |
Highlight Tech and Leader Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Tech and Leader Electronics
The main advantage of trading using opposite Highlight Tech and Leader Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Tech 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.| Highlight Tech vs. WiseChip Semiconductor | Highlight Tech vs. Novatek Microelectronics Corp | Highlight Tech vs. Leader Electronics | Highlight Tech vs. Information Technology Total |
| Leader Electronics vs. Universal Microelectronics Co | Leader Electronics vs. AVerMedia Technologies | Leader Electronics vs. Symtek Automation Asia | Leader Electronics vs. WiseChip Semiconductor |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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