Correlation Between Hsin Kuang and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Hsin Kuang and Novatek Microelectronics 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 Hsin Kuang and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hsin Kuang Steel and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Hsin Kuang and Novatek Microelectronics 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 Hsin Kuang with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsin Kuang and Novatek Microelectronics.
Diversification Opportunities for Hsin Kuang and Novatek Microelectronics
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hsin and Novatek is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hsin Kuang Steel and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Hsin Kuang 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 Hsin Kuang Steel are associated (or correlated) with Novatek Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novatek Microelectronics has no effect on the direction of Hsin Kuang i.e., Hsin Kuang and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Hsin Kuang and Novatek Microelectronics
Assuming the 90 days trading horizon Hsin Kuang Steel is expected to generate 1.32 times more return on investment than Novatek Microelectronics. However, Hsin Kuang is 1.32 times more volatile than Novatek Microelectronics Corp. It trades about -0.06 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about -0.09 per unit of risk. If you would invest 6,080 in Hsin Kuang Steel on September 1, 2024 and sell it today you would lose (1,125) from holding Hsin Kuang Steel or give up 18.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hsin Kuang Steel vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Hsin Kuang Steel |
| Novatek Microelectronics |
Hsin Kuang and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hsin Kuang and Novatek Microelectronics
The main advantage of trading using opposite Hsin Kuang and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hsin Kuang position performs unexpectedly, Novatek Microelectronics 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 Novatek Microelectronics will offset losses from the drop in Novatek Microelectronics' long position.| Hsin Kuang vs. Chung Hung Steel | Hsin Kuang vs. Tung Ho Steel | Hsin Kuang vs. Ta Chen Stainless | Hsin Kuang vs. Feng Hsin Steel |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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