Correlation Between Ares International and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Ares International 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 Ares International and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares International Corp and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Ares International 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 Ares International with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares International and Novatek Microelectronics.
Diversification Opportunities for Ares International and Novatek Microelectronics
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ares and Novatek is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ares International Corp and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Ares International 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 Ares International Corp 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 Ares International i.e., Ares International and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Ares International and Novatek Microelectronics
Assuming the 90 days trading horizon Ares International Corp is expected to generate 1.26 times more return on investment than Novatek Microelectronics. However, Ares International is 1.26 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 0.06 per unit of risk. If you would invest 2,760 in Ares International Corp on August 28, 2024 and sell it today you would earn a total of 2,020 from holding Ares International Corp or generate 73.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares International Corp vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Ares International Corp |
| Novatek Microelectronics |
Ares International and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares International and Novatek Microelectronics
The main advantage of trading using opposite Ares International and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares International 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.| Ares International vs. Syscom Computer Engineering | Ares International vs. Stark Technology | Ares International vs. Audix Corp | Ares International vs. Fortune Information Systems |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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