Correlation Between Leadtek Research and Sun Max

Can any of the company-specific risk be diversified away by investing in both Leadtek Research and Sun Max 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 Leadtek Research and Sun Max into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leadtek Research and Sun Max Tech, you can compare the effects of market volatilities on Leadtek Research and Sun Max 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 Leadtek Research with a short position of Sun Max. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leadtek Research and Sun Max.

Diversification Opportunities for Leadtek Research and Sun Max

-0.51

Correlation Coefficient

Leadtek Research  Sun Max

Excellent diversification

The 3 months correlation between Leadtek and Sun is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Leadtek Research and Sun Max Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Max Tech and Leadtek Research 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 Leadtek Research are associated (or correlated) with Sun Max. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Max Tech has no effect on the direction of Leadtek Research i.e., Leadtek Research and Sun Max go up and down completely randomly.

Pair Corralation between Leadtek Research and Sun Max

Assuming the 90 days trading horizon Leadtek Research is expected to under-perform the Sun Max. In addition to that, Leadtek Research is 1.71 times more volatile than Sun Max Tech. It trades about -0.04 of its total potential returns per unit of risk. Sun Max Tech is currently generating about 0.09 per unit of volatility. If you would invest  4,725  in Sun Max Tech on September 9, 2024 and sell it today you would earn a total of  725.00  from holding Sun Max Tech or generate 15.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Leadtek Research  vs.  Sun Max Tech

Leadtek Research

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leadtek Research has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Leadtek Research is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sun Max Tech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Max Tech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sun Max may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Leadtek Research and Sun Max

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

The idea behind Leadtek Research and Sun Max Tech 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 Global Correlations module to find global opportunities by holding instruments from different markets.