Correlation Between Novatek Microelectronics and Lung Hwa
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Lung Hwa 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 Lung Hwa 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 Lung Hwa Electronics, you can compare the effects of market volatilities on Novatek Microelectronics and Lung Hwa 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 Lung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Lung Hwa.
Diversification Opportunities for Novatek Microelectronics and Lung Hwa
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Novatek and Lung is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Lung Hwa Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lung Hwa Electronics 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 Lung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lung Hwa Electronics has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Lung Hwa go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Lung Hwa
Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 2.74 times less return on investment than Lung Hwa. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 1.9 times less risky than Lung Hwa. It trades about 0.06 of its potential returns per unit of risk. Lung Hwa Electronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,050 in Lung Hwa Electronics on September 3, 2024 and sell it today you would earn a total of 5,370 from holding Lung Hwa Electronics or generate 261.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novatek Microelectronics Corp vs. Lung Hwa Electronics
Performance |
| Timeline |
| Novatek Microelectronics |
| Lung Hwa Electronics |
Novatek Microelectronics and Lung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Lung Hwa
The main advantage of trading using opposite Novatek Microelectronics and Lung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Lung Hwa 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 Lung Hwa will offset losses from the drop in Lung Hwa's long position.| Novatek Microelectronics vs. First Hotel Co | Novatek Microelectronics vs. BenQ Materials Corp | Novatek Microelectronics vs. FarGlory Hotel Co | Novatek Microelectronics vs. Grand Plastic Technology |
| Lung Hwa vs. Tainan Spinning Co | Lung Hwa vs. Chia Her Industrial | Lung Hwa vs. WiseChip Semiconductor | Lung Hwa vs. Novatek Microelectronics 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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