Correlation Between Ma Kuang and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Ma Kuang 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 Ma Kuang and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ma Kuang Healthcare and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Ma Kuang 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 Ma Kuang with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ma Kuang and Novatek Microelectronics.
Diversification Opportunities for Ma Kuang and Novatek Microelectronics
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 4139 and Novatek is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ma Kuang Healthcare and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Ma Kuang 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 Ma Kuang Healthcare 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 Ma Kuang i.e., Ma Kuang and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Ma Kuang and Novatek Microelectronics
Assuming the 90 days trading horizon Ma Kuang is expected to generate 4.26 times less return on investment than Novatek Microelectronics. In addition to that, Ma Kuang is 1.26 times more volatile than Novatek Microelectronics Corp. It trades about 0.02 of its total potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about 0.11 per unit of volatility. If you would invest 50,000 in Novatek Microelectronics Corp on October 24, 2024 and sell it today you would earn a total of 1,800 from holding Novatek Microelectronics Corp or generate 3.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ma Kuang Healthcare vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Ma Kuang Healthcare |
| Novatek Microelectronics |
Ma Kuang and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ma Kuang and Novatek Microelectronics
The main advantage of trading using opposite Ma Kuang and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ma Kuang 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.| Ma Kuang vs. Newretail Co | Ma Kuang vs. Provision Information CoLtd | Ma Kuang vs. Jetway Information Co | Ma Kuang vs. Otsuka Information Technology |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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