Correlation Between LEENO Industrial and SFA Semicon

Can any of the company-specific risk be diversified away by investing in both LEENO Industrial and SFA Semicon 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 LEENO Industrial and SFA Semicon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LEENO Industrial and SFA Semicon Co, you can compare the effects of market volatilities on LEENO Industrial and SFA Semicon 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 LEENO Industrial with a short position of SFA Semicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEENO Industrial and SFA Semicon.

Diversification Opportunities for LEENO Industrial and SFA Semicon

0.9

Correlation Coefficient

LEENO Industrial  SFA Semicon

Almost no diversification

The 3 months correlation between LEENO and SFA is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding LEENO Industrial and SFA Semicon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFA Semicon and LEENO Industrial 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 LEENO Industrial are associated (or correlated) with SFA Semicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFA Semicon has no effect on the direction of LEENO Industrial i.e., LEENO Industrial and SFA Semicon go up and down completely randomly.

Pair Corralation between LEENO Industrial and SFA Semicon

Assuming the 90 days trading horizon LEENO Industrial is expected to generate 1.21 times more return on investment than SFA Semicon. However, LEENO Industrial is 1.21 times more volatile than SFA Semicon Co. It trades about -0.03 of its potential returns per unit of risk. SFA Semicon Co is currently generating about -0.09 per unit of risk. If you would invest  17,910,000  in LEENO Industrial on September 13, 2024 and sell it today you would lose (1,370,000) from holding LEENO Industrial or give up 7.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.31%
Values	Daily Returns

LEENO Industrial  vs.  SFA Semicon Co

LEENO Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LEENO Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LEENO Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SFA Semicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFA Semicon Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LEENO Industrial and SFA Semicon

The main advantage of trading using opposite LEENO Industrial and SFA Semicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEENO Industrial position performs unexpectedly, SFA Semicon 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 SFA Semicon will offset losses from the drop in SFA Semicon's long position.

The idea behind LEENO Industrial and SFA Semicon Co 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.