Correlation Between Indie Semiconductor and Nova
Can any of the company-specific risk be diversified away by investing in both Indie Semiconductor 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 Indie Semiconductor and Nova into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between indie Semiconductor and Nova, you can compare the effects of market volatilities on Indie Semiconductor 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 Indie Semiconductor with a short position of Nova. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indie Semiconductor and Nova.
Diversification Opportunities for Indie Semiconductor and Nova
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Indie and Nova is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding indie Semiconductor and Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova and Indie Semiconductor 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 indie Semiconductor 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 Indie Semiconductor i.e., Indie Semiconductor and Nova go up and down completely randomly.
Pair Corralation between Indie Semiconductor and Nova
Given the investment horizon of 90 days indie Semiconductor is expected to under-perform the Nova. In addition to that, Indie Semiconductor is 1.61 times more volatile than Nova. It trades about -0.26 of its total potential returns per unit of risk. Nova is currently generating about 0.18 per unit of volatility. If you would invest 22,909 in Nova on November 29, 2024 and sell it today you would earn a total of 2,356 from holding Nova or generate 10.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
indie Semiconductor vs. Nova
Performance |
| Timeline |
| indie Semiconductor |
| Nova |
Indie Semiconductor and Nova Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indie Semiconductor and Nova
The main advantage of trading using opposite Indie Semiconductor and Nova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indie Semiconductor 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.| Indie Semiconductor vs. Axcelis Technologies | Indie Semiconductor vs. inTest | Indie Semiconductor vs. Lam Research Corp | Indie Semiconductor vs. Photronics |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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