Correlation Between Leadtrend Technology and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Leadtrend Technology 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 Leadtrend Technology and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leadtrend Technology Corp and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Leadtrend Technology 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 Leadtrend Technology with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leadtrend Technology and Novatek Microelectronics.
Diversification Opportunities for Leadtrend Technology and Novatek Microelectronics
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Leadtrend and Novatek is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Leadtrend Technology Corp and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Leadtrend Technology 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 Leadtrend Technology Corp 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 Leadtrend Technology i.e., Leadtrend Technology and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Leadtrend Technology and Novatek Microelectronics
Assuming the 90 days trading horizon Leadtrend Technology Corp is expected to under-perform the Novatek Microelectronics. In addition to that, Leadtrend Technology is 1.48 times more volatile than Novatek Microelectronics Corp. It trades about -0.34 of its total potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about -0.24 per unit of volatility. If you would invest 51,500 in Novatek Microelectronics Corp on August 27, 2024 and sell it today you would lose (3,500) from holding Novatek Microelectronics Corp or give up 6.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leadtrend Technology Corp vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Leadtrend Technology Corp |
| Novatek Microelectronics |
Leadtrend Technology and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leadtrend Technology and Novatek Microelectronics
The main advantage of trading using opposite Leadtrend Technology and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leadtrend Technology 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.| Leadtrend Technology vs. Novatek Microelectronics Corp | Leadtrend Technology vs. Quanta Computer | Leadtrend Technology vs. United Microelectronics |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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