Correlation Between New Advanced and Microelectronics
Can any of the company-specific risk be diversified away by investing in both New Advanced and 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 New Advanced and Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Advanced Electronics and Microelectronics Technology, you can compare the effects of market volatilities on New Advanced and 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 New Advanced with a short position of Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Advanced and Microelectronics.
Diversification Opportunities for New Advanced and Microelectronics
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Microelectronics is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding New Advanced Electronics and Microelectronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microelectronics Tec and New Advanced 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 New Advanced Electronics are associated (or correlated) with Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microelectronics Tec has no effect on the direction of New Advanced i.e., New Advanced and Microelectronics go up and down completely randomly.
Pair Corralation between New Advanced and Microelectronics
Assuming the 90 days trading horizon New Advanced Electronics is expected to under-perform the Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, New Advanced Electronics is 1.88 times less risky than Microelectronics. The stock trades about -0.32 of its potential returns per unit of risk. The Microelectronics Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,950 in Microelectronics Technology on September 3, 2024 and sell it today you would earn a total of 180.00 from holding Microelectronics Technology or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Advanced Electronics vs. Microelectronics Technology
Performance |
| Timeline |
| New Advanced Electronics |
| Microelectronics Tec |
New Advanced and Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Advanced and Microelectronics
The main advantage of trading using opposite New Advanced and Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Advanced position performs unexpectedly, 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 Microelectronics will offset losses from the drop in Microelectronics' long position.| New Advanced vs. Wei Chuan Foods | New Advanced vs. SS Healthcare Holding | New Advanced vs. Tehmag Foods | New Advanced vs. First Insurance Co |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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