Correlation Between Novatek Microelectronics and U Ming
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and U Ming 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 U Ming 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 U Ming Marine Transport, you can compare the effects of market volatilities on Novatek Microelectronics and U Ming 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 U Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and U Ming.
Diversification Opportunities for Novatek Microelectronics and U Ming
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Novatek and 2606 is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and U Ming Marine Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Ming Marine 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 U Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Ming Marine has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and U Ming go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and U Ming
Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 2.25 times less return on investment than U Ming. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 1.23 times less risky than U Ming. It trades about 0.02 of its potential returns per unit of risk. U Ming Marine Transport is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,960 in U Ming Marine Transport on August 31, 2024 and sell it today you would earn a total of 1,000.00 from holding U Ming Marine Transport or generate 20.16% 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. U Ming Marine Transport
Performance |
| Timeline |
| Novatek Microelectronics |
| U Ming Marine |
Novatek Microelectronics and U Ming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and U Ming
The main advantage of trading using opposite Novatek Microelectronics and U Ming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, U Ming 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 U Ming will offset losses from the drop in U Ming's long position.The idea behind Novatek Microelectronics Corp and U Ming Marine Transport 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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