Correlation Between Novatek Microelectronics and Para Light
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Para Light 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 Para Light 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 Para Light Electronics, you can compare the effects of market volatilities on Novatek Microelectronics and Para Light 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 Para Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Para Light.
Diversification Opportunities for Novatek Microelectronics and Para Light
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Novatek and Para is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Para Light Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Para Light 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 Para Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Para Light Electronics has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Para Light go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Para Light
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 1.83 times more return on investment than Para Light. However, Novatek Microelectronics is 1.83 times more volatile than Para Light Electronics. It trades about 0.23 of its potential returns per unit of risk. Para Light Electronics is currently generating about -0.1 per unit of risk. If you would invest 49,450 in Novatek Microelectronics Corp on November 4, 2024 and sell it today you would earn a total of 2,950 from holding Novatek Microelectronics Corp or generate 5.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novatek Microelectronics Corp vs. Para Light Electronics
Performance |
| Timeline |
| Novatek Microelectronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Para Light Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Novatek Microelectronics and Para Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Para Light
The main advantage of trading using opposite Novatek Microelectronics and Para Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Para Light 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 Para Light will offset losses from the drop in Para Light's long position.The idea behind Novatek Microelectronics Corp and Para Light Electronics 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.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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