Correlation Between Novatek Microelectronics and Advanced Lithium
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Advanced Lithium 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 Advanced Lithium 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 Advanced Lithium Electrochemistry, you can compare the effects of market volatilities on Novatek Microelectronics and Advanced Lithium 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 Advanced Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Advanced Lithium.
Diversification Opportunities for Novatek Microelectronics and Advanced Lithium
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Novatek and Advanced is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Advanced Lithium Electrochemis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Lithium Ele 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 Advanced Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Lithium Ele has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Advanced Lithium go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Advanced Lithium
Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 32.34 times less return on investment than Advanced Lithium. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 34.55 times less risky than Advanced Lithium. It trades about 0.06 of its potential returns per unit of risk. Advanced Lithium Electrochemistry is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,246 in Advanced Lithium Electrochemistry on September 4, 2024 and sell it today you would lose (4,081) from holding Advanced Lithium Electrochemistry or give up 49.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novatek Microelectronics Corp vs. Advanced Lithium Electrochemis
Performance |
| Timeline |
| Novatek Microelectronics |
| Advanced Lithium Ele |
Novatek Microelectronics and Advanced Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Advanced Lithium
The main advantage of trading using opposite Novatek Microelectronics and Advanced Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Advanced Lithium 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 Advanced Lithium will offset losses from the drop in Advanced Lithium's long position.The idea behind Novatek Microelectronics Corp and Advanced Lithium Electrochemistry 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.
| Advanced Lithium vs. STL Technology Co | Advanced Lithium vs. Silicon Power Computer | Advanced Lithium vs. United Radiant Technology | Advanced Lithium vs. Simplo Technology Co |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |