Correlation Between Macauto Industrial and E Lead

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

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

Diversification Opportunities for Macauto Industrial and E Lead

0.45

Correlation Coefficient

Macauto Industrial  E Lead

Very weak diversification

The 3 months correlation between Macauto and 2497 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Macauto Industrial Co and E Lead Electronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Lead Electronic and Macauto 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 Macauto Industrial Co are associated (or correlated) with E Lead. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Lead Electronic has no effect on the direction of Macauto Industrial i.e., Macauto Industrial and E Lead go up and down completely randomly.

Pair Corralation between Macauto Industrial and E Lead

Assuming the 90 days trading horizon Macauto Industrial Co is expected to under-perform the E Lead. But the stock apears to be less risky and, when comparing its historical volatility, Macauto Industrial Co is 4.3 times less risky than E Lead. The stock trades about -0.23 of its potential returns per unit of risk. The E Lead Electronic Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6,570  in E Lead Electronic Co on September 3, 2024 and sell it today you would lose (120.00) from holding E Lead Electronic Co or give up 1.83% of portfolio value over 90 days.

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

Macauto Industrial Co  vs.  E Lead Electronic Co

Macauto Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macauto Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

E Lead Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Macauto Industrial and E Lead

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

The idea behind Macauto Industrial Co and E Lead Electronic 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.