Correlation Between Celxpert Energy and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Celxpert Energy and Novatek Microelectronics 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 Celxpert Energy and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Celxpert Energy and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Celxpert Energy and Novatek Microelectronics 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 Celxpert Energy with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Celxpert Energy and Novatek Microelectronics.
Diversification Opportunities for Celxpert Energy and Novatek Microelectronics
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Celxpert and Novatek is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Celxpert Energy and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Celxpert Energy 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 Celxpert Energy are associated (or correlated) with Novatek Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novatek Microelectronics has no effect on the direction of Celxpert Energy i.e., Celxpert Energy and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Celxpert Energy and Novatek Microelectronics
Assuming the 90 days trading horizon Celxpert Energy is expected to generate 2.75 times more return on investment than Novatek Microelectronics. However, Celxpert Energy is 2.75 times more volatile than Novatek Microelectronics Corp. It trades about 0.12 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about 0.0 per unit of risk. If you would invest 2,465 in Celxpert Energy on November 2, 2024 and sell it today you would earn a total of 1,185 from holding Celxpert Energy or generate 48.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Celxpert Energy vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Celxpert Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Novatek Microelectronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Celxpert Energy and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Celxpert Energy and Novatek Microelectronics
The main advantage of trading using opposite Celxpert Energy and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celxpert Energy position performs unexpectedly, Novatek Microelectronics 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 Novatek Microelectronics will offset losses from the drop in Novatek Microelectronics' long position.The idea behind Celxpert Energy and Novatek Microelectronics Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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