Correlation Between Advanced Power and Niko Semiconductor
Can any of the company-specific risk be diversified away by investing in both Advanced Power and Niko Semiconductor 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 Advanced Power and Niko Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Power Electronics and Niko Semiconductor Co, you can compare the effects of market volatilities on Advanced Power and Niko Semiconductor 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 Advanced Power with a short position of Niko Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Power and Niko Semiconductor.
Diversification Opportunities for Advanced Power and Niko Semiconductor
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Advanced and Niko is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Power Electronics and Niko Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niko Semiconductor and Advanced Power 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 Advanced Power Electronics are associated (or correlated) with Niko Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niko Semiconductor has no effect on the direction of Advanced Power i.e., Advanced Power and Niko Semiconductor go up and down completely randomly.
Pair Corralation between Advanced Power and Niko Semiconductor
Assuming the 90 days trading horizon Advanced Power Electronics is expected to under-perform the Niko Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Power Electronics is 1.08 times less risky than Niko Semiconductor. The stock trades about -0.38 of its potential returns per unit of risk. The Niko Semiconductor Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,545 in Niko Semiconductor Co on November 6, 2024 and sell it today you would earn a total of 25.00 from holding Niko Semiconductor Co or generate 0.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Power Electronics vs. Niko Semiconductor Co
Performance |
| Timeline |
| Advanced Power Elect |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Niko Semiconductor |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Advanced Power and Niko Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Power and Niko Semiconductor
The main advantage of trading using opposite Advanced Power and Niko Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Power position performs unexpectedly, Niko Semiconductor 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 Niko Semiconductor will offset losses from the drop in Niko Semiconductor's long position.The idea behind Advanced Power Electronics and Niko Semiconductor Co 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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