Correlation Between Novatek Microelectronics and Nan Liu
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Nan Liu 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 Nan Liu 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 Nan Liu Enterprise, you can compare the effects of market volatilities on Novatek Microelectronics and Nan Liu 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 Nan Liu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Nan Liu.
Diversification Opportunities for Novatek Microelectronics and Nan Liu
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Novatek and Nan is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Nan Liu Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Liu Enterprise 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 Nan Liu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Liu Enterprise has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Nan Liu go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Nan Liu
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 0.92 times more return on investment than Nan Liu. However, Novatek Microelectronics Corp is 1.08 times less risky than Nan Liu. It trades about 0.03 of its potential returns per unit of risk. Nan Liu Enterprise is currently generating about -0.09 per unit of risk. If you would invest 48,150 in Novatek Microelectronics Corp on September 13, 2024 and sell it today you would earn a total of 350.00 from holding Novatek Microelectronics Corp or generate 0.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novatek Microelectronics Corp vs. Nan Liu Enterprise
Performance |
| Timeline |
| Novatek Microelectronics |
| Nan Liu Enterprise |
Novatek Microelectronics and Nan Liu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Nan Liu
The main advantage of trading using opposite Novatek Microelectronics and Nan Liu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Nan Liu 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 Nan Liu will offset losses from the drop in Nan Liu's long position.The idea behind Novatek Microelectronics Corp and Nan Liu Enterprise 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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