Correlation Between Novatek Microelectronics and Jinli Group
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Jinli Group 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 Jinli Group 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 Jinli Group Holdings, you can compare the effects of market volatilities on Novatek Microelectronics and Jinli Group 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 Jinli Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Jinli Group.
Diversification Opportunities for Novatek Microelectronics and Jinli Group
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Novatek and Jinli is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Jinli Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinli Group Holdings 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 Jinli Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinli Group Holdings has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Jinli Group go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Jinli Group
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the Jinli Group. But the stock apears to be less risky and, when comparing its historical volatility, Novatek Microelectronics Corp is 2.41 times less risky than Jinli Group. The stock trades about -0.05 of its potential returns per unit of risk. The Jinli Group Holdings is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,075 in Jinli Group Holdings on September 12, 2024 and sell it today you would earn a total of 235.00 from holding Jinli Group Holdings or generate 21.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novatek Microelectronics Corp vs. Jinli Group Holdings
Performance |
| Timeline |
| Novatek Microelectronics |
| Jinli Group Holdings |
Novatek Microelectronics and Jinli Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Jinli Group
The main advantage of trading using opposite Novatek Microelectronics and Jinli Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Jinli Group 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 Jinli Group will offset losses from the drop in Jinli Group's long position.The idea behind Novatek Microelectronics Corp and Jinli Group Holdings 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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