Correlation Between Novatek Microelectronics and Li Peng
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Li Peng 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 Novatek Microelectronics and Li Peng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novatek Microelectronics Corp and Li Peng Enterprise, you can compare the effects of market volatilities on Novatek Microelectronics and Li Peng 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 Novatek Microelectronics with a short position of Li Peng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Li Peng.
Diversification Opportunities for Novatek Microelectronics and Li Peng
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novatek and 1447 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Li Peng Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Peng Enterprise and Novatek Microelectronics 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 Novatek Microelectronics Corp are associated (or correlated) with Li Peng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Peng Enterprise has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Li Peng go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Li Peng
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the Li Peng. But the stock apears to be less risky and, when comparing its historical volatility, Novatek Microelectronics Corp is 1.11 times less risky than Li Peng. The stock trades about 0.0 of its potential returns per unit of risk. The Li Peng Enterprise is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 803.00 in Li Peng Enterprise on September 4, 2024 and sell it today you would lose (30.00) from holding Li Peng Enterprise or give up 3.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novatek Microelectronics Corp vs. Li Peng Enterprise
Performance |
| Timeline |
| Novatek Microelectronics |
| Li Peng Enterprise |
Novatek Microelectronics and Li Peng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Li Peng
The main advantage of trading using opposite Novatek Microelectronics and Li Peng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Li Peng 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 Li Peng will offset losses from the drop in Li Peng's long position.The idea behind Novatek Microelectronics Corp and Li Peng Enterprise pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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