Correlation Between Lungyen Life and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Lungyen Life 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 Lungyen Life and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lungyen Life Service and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Lungyen Life 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 Lungyen Life with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lungyen Life and Novatek Microelectronics.
Diversification Opportunities for Lungyen Life and Novatek Microelectronics
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lungyen and Novatek is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lungyen Life Service and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Lungyen Life 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 Lungyen Life Service 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 Lungyen Life i.e., Lungyen Life and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Lungyen Life and Novatek Microelectronics
Assuming the 90 days trading horizon Lungyen Life Service is expected to generate 0.99 times more return on investment than Novatek Microelectronics. However, Lungyen Life Service is 1.01 times less risky than Novatek Microelectronics. It trades about 0.07 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 4,840 in Lungyen Life Service on November 2, 2024 and sell it today you would earn a total of 460.00 from holding Lungyen Life Service or generate 9.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lungyen Life Service vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Lungyen Life Service |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Novatek Microelectronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Lungyen Life and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lungyen Life and Novatek Microelectronics
The main advantage of trading using opposite Lungyen Life and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lungyen Life 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 Lungyen Life Service 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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