Correlation Between Quanta Computer and Ledtech Electronics

Can any of the company-specific risk be diversified away by investing in both Quanta Computer and Ledtech 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 Quanta Computer and Ledtech Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Quanta Computer and Ledtech Electronics Corp, you can compare the effects of market volatilities on Quanta Computer and Ledtech 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 Quanta Computer with a short position of Ledtech Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quanta Computer and Ledtech Electronics.

Diversification Opportunities for Quanta Computer and Ledtech Electronics

0.67

Correlation Coefficient

Quanta Computer  Ledtech Electronics

Poor diversification

The 3 months correlation between Quanta and Ledtech is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Quanta Computer and Ledtech Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ledtech Electronics Corp and Quanta Computer 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 Quanta Computer are associated (or correlated) with Ledtech Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ledtech Electronics Corp has no effect on the direction of Quanta Computer i.e., Quanta Computer and Ledtech Electronics go up and down completely randomly.

Pair Corralation between Quanta Computer and Ledtech Electronics

Assuming the 90 days trading horizon Quanta Computer is expected to generate 0.45 times more return on investment than Ledtech Electronics. However, Quanta Computer is 2.21 times less risky than Ledtech Electronics. It trades about 0.09 of its potential returns per unit of risk. Ledtech Electronics Corp is currently generating about 0.02 per unit of risk. If you would invest  26,400  in Quanta Computer on September 28, 2024 and sell it today you would earn a total of  2,700  from holding Quanta Computer or generate 10.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Quanta Computer  vs.  Ledtech Electronics Corp

Quanta Computer

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quanta Computer are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Quanta Computer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ledtech Electronics Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ledtech Electronics Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ledtech Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Quanta Computer and Ledtech Electronics

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

The idea behind Quanta Computer and Ledtech Electronics Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.