Correlation Between Daqo New and Nova
Can any of the company-specific risk be diversified away by investing in both Daqo New and Nova 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 Daqo New and Nova into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daqo New Energy and Nova, you can compare the effects of market volatilities on Daqo New and Nova 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 Daqo New with a short position of Nova. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daqo New and Nova.
Diversification Opportunities for Daqo New and Nova
Very good diversification
The 3 months correlation between Daqo and Nova is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Daqo New Energy and Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova and Daqo New 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 Daqo New Energy are associated (or correlated) with Nova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova has no effect on the direction of Daqo New i.e., Daqo New and Nova go up and down completely randomly.
Pair Corralation between Daqo New and Nova
Allowing for the 90-day total investment horizon Daqo New Energy is expected to under-perform the Nova. But the stock apears to be less risky and, when comparing its historical volatility, Daqo New Energy is 1.15 times less risky than Nova. The stock trades about -0.08 of its potential returns per unit of risk. The Nova is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 19,695 in Nova on November 1, 2024 and sell it today you would earn a total of 4,352 from holding Nova or generate 22.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daqo New Energy vs. Nova
Performance |
| Timeline |
| Daqo New Energy |
| Nova |
Daqo New and Nova Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daqo New and Nova
The main advantage of trading using opposite Daqo New and Nova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daqo New position performs unexpectedly, Nova 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 Nova will offset losses from the drop in Nova's long position.| Daqo New vs. Axcelis Technologies | Daqo New vs. Kulicke and Soffa | Daqo New vs. Ultra Clean Holdings | Daqo New vs. Cohu Inc |
| Nova vs. Diodes Incorporated | Nova vs. Daqo New Energy | Nova vs. Micron Technology | Nova vs. MagnaChip Semiconductor |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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