Correlation Between Novatek Microelectronics and Lion Travel
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Lion Travel 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 Lion Travel 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 Lion Travel Service, you can compare the effects of market volatilities on Novatek Microelectronics and Lion Travel 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 Lion Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Lion Travel.
Diversification Opportunities for Novatek Microelectronics and Lion Travel
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novatek and Lion is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Lion Travel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Travel Service 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 Lion Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Travel Service has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Lion Travel go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Lion Travel
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the Lion Travel. But the stock apears to be less risky and, when comparing its historical volatility, Novatek Microelectronics Corp is 1.33 times less risky than Lion Travel. The stock trades about -0.1 of its potential returns per unit of risk. The Lion Travel Service is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 15,400 in Lion Travel Service on September 3, 2024 and sell it today you would lose (3,250) from holding Lion Travel Service or give up 21.1% 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. Lion Travel Service
Performance |
| Timeline |
| Novatek Microelectronics |
| Lion Travel Service |
Novatek Microelectronics and Lion Travel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Lion Travel
The main advantage of trading using opposite Novatek Microelectronics and Lion Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Lion Travel 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 Lion Travel will offset losses from the drop in Lion Travel'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 |
| Lion Travel vs. Tainan Spinning Co | Lion Travel vs. Chia Her Industrial | Lion Travel vs. WiseChip Semiconductor | Lion Travel 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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