Correlation Between Wah Lee and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Wah Lee 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 Wah Lee and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wah Lee Industrial and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Wah Lee 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 Wah Lee with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wah Lee and Novatek Microelectronics.
Diversification Opportunities for Wah Lee and Novatek Microelectronics
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wah and Novatek is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Wah Lee Industrial and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Wah Lee 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 Wah Lee Industrial 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 Wah Lee i.e., Wah Lee and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Wah Lee and Novatek Microelectronics
Assuming the 90 days trading horizon Wah Lee Industrial is expected to generate 1.47 times more return on investment than Novatek Microelectronics. However, Wah Lee is 1.47 times more volatile than Novatek Microelectronics Corp. It trades about 0.14 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about -0.07 per unit of risk. If you would invest 12,100 in Wah Lee Industrial on September 14, 2024 and sell it today you would earn a total of 550.00 from holding Wah Lee Industrial or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wah Lee Industrial vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Wah Lee Industrial |
| Novatek Microelectronics |
Wah Lee and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wah Lee and Novatek Microelectronics
The main advantage of trading using opposite Wah Lee and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wah Lee 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.| Wah Lee vs. Huaku Development Co | Wah Lee vs. Topco Scientific Co | Wah Lee vs. Test Research | Wah Lee vs. Shinkong Insurance Co |
| Novatek Microelectronics vs. Sunmax Biotechnology Co | Novatek Microelectronics vs. Yeou Yih Steel | Novatek Microelectronics vs. Chun Yuan Steel | Novatek Microelectronics vs. Tait Marketing Distribution |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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