Correlation Between Novatek Microelectronics and Chong Hong
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Chong Hong 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 Chong Hong 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 Chong Hong Construction, you can compare the effects of market volatilities on Novatek Microelectronics and Chong Hong 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 Chong Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Chong Hong.
Diversification Opportunities for Novatek Microelectronics and Chong Hong
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Novatek and Chong is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Chong Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chong Hong Construction 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 Chong Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chong Hong Construction has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Chong Hong go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Chong Hong
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 1.36 times more return on investment than Chong Hong. However, Novatek Microelectronics is 1.36 times more volatile than Chong Hong Construction. It trades about 0.14 of its potential returns per unit of risk. Chong Hong Construction is currently generating about -0.32 per unit of risk. If you would invest 48,500 in Novatek Microelectronics Corp on October 20, 2024 and sell it today you would earn a total of 2,100 from holding Novatek Microelectronics Corp or generate 4.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novatek Microelectronics Corp vs. Chong Hong Construction
Performance |
| Timeline |
| Novatek Microelectronics |
| Chong Hong Construction |
Novatek Microelectronics and Chong Hong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Chong Hong
The main advantage of trading using opposite Novatek Microelectronics and Chong Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Chong Hong 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 Chong Hong will offset losses from the drop in Chong Hong's long position.The idea behind Novatek Microelectronics Corp and Chong Hong Construction 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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