Correlation Between Novatek Microelectronics and Holiday Entertainment
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Holiday Entertainment 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 Novatek Microelectronics and Holiday Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novatek Microelectronics Corp and Holiday Entertainment Co, you can compare the effects of market volatilities on Novatek Microelectronics and Holiday Entertainment 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 Novatek Microelectronics with a short position of Holiday Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Holiday Entertainment.
Diversification Opportunities for Novatek Microelectronics and Holiday Entertainment
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Novatek and Holiday is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Holiday Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holiday Entertainment and Novatek Microelectronics 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 Novatek Microelectronics Corp are associated (or correlated) with Holiday Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holiday Entertainment has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Holiday Entertainment go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Holiday Entertainment
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 2.6 times more return on investment than Holiday Entertainment. However, Novatek Microelectronics is 2.6 times more volatile than Holiday Entertainment Co. It trades about 0.17 of its potential returns per unit of risk. Holiday Entertainment Co is currently generating about 0.03 per unit of risk. If you would invest 48,450 in Novatek Microelectronics Corp on December 2, 2024 and sell it today you would earn a total of 6,050 from holding Novatek Microelectronics Corp or generate 12.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Novatek Microelectronics Corp vs. Holiday Entertainment Co
Performance |
Timeline |
Novatek Microelectronics |
Holiday Entertainment |
Novatek Microelectronics and Holiday Entertainment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Novatek Microelectronics and Holiday Entertainment
The main advantage of trading using opposite Novatek Microelectronics and Holiday Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Holiday Entertainment 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 Holiday Entertainment will offset losses from the drop in Holiday Entertainment's long position.Novatek Microelectronics vs. U Ming Marine Transport | Novatek Microelectronics vs. ANJI Technology Co | Novatek Microelectronics vs. Maxigen Biotech | Novatek Microelectronics vs. Ichia Technologies |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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