Correlation Between King Yuan and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both King Yuan 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 King Yuan and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between King Yuan Electronics and Novatek Microelectronics Corp, you can compare the effects of market volatilities on King Yuan 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 King Yuan with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of King Yuan and Novatek Microelectronics.
Diversification Opportunities for King Yuan and Novatek Microelectronics
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between King and Novatek is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding King Yuan Electronics and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and King Yuan 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 King Yuan Electronics 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 King Yuan i.e., King Yuan and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between King Yuan and Novatek Microelectronics
Assuming the 90 days trading horizon King Yuan Electronics is expected to generate 1.64 times more return on investment than Novatek Microelectronics. However, King Yuan is 1.64 times more volatile than Novatek Microelectronics Corp. It trades about 0.07 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about 0.0 per unit of risk. If you would invest 8,420 in King Yuan Electronics on August 29, 2024 and sell it today you would earn a total of 4,130 from holding King Yuan Electronics or generate 49.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
King Yuan Electronics vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| King Yuan Electronics |
| Novatek Microelectronics |
King Yuan and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with King Yuan and Novatek Microelectronics
The main advantage of trading using opposite King Yuan and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if King Yuan 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.| King Yuan vs. Powertech Technology | King Yuan vs. Novatek Microelectronics Corp | King Yuan vs. Greatek Electronics | King Yuan vs. Nanya Technology Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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