Correlation Between Louisa Professional and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Louisa Professional 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 Louisa Professional and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Louisa Professional Coffee and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Louisa Professional 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 Louisa Professional with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Louisa Professional and Novatek Microelectronics.
Diversification Opportunities for Louisa Professional and Novatek Microelectronics
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Louisa and Novatek is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Louisa Professional Coffee and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Louisa Professional 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 Louisa Professional Coffee 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 Louisa Professional i.e., Louisa Professional and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Louisa Professional and Novatek Microelectronics
Assuming the 90 days trading horizon Louisa Professional Coffee is expected to generate 0.93 times more return on investment than Novatek Microelectronics. However, Louisa Professional Coffee is 1.08 times less risky than Novatek Microelectronics. It trades about 0.18 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about 0.11 per unit of risk. If you would invest 8,484 in Louisa Professional Coffee on October 24, 2024 and sell it today you would earn a total of 476.00 from holding Louisa Professional Coffee or generate 5.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Louisa Professional Coffee vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Louisa Professional |
| Novatek Microelectronics |
Louisa Professional and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Louisa Professional and Novatek Microelectronics
The main advantage of trading using opposite Louisa Professional and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Louisa Professional 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.| Louisa Professional vs. AVerMedia Technologies | Louisa Professional vs. First Copper Technology | Louisa Professional vs. Universal Vision Biotechnology | Louisa Professional vs. Amulaire Thermal Technology |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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