Correlation Between Nuvoton Technology and Champion Microelectronic

Can any of the company-specific risk be diversified away by investing in both Nuvoton Technology and Champion Microelectronic 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 Nuvoton Technology and Champion Microelectronic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nuvoton Technology Corp and Champion Microelectronic Corp, you can compare the effects of market volatilities on Nuvoton Technology and Champion Microelectronic 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 Nuvoton Technology with a short position of Champion Microelectronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuvoton Technology and Champion Microelectronic.

Diversification Opportunities for Nuvoton Technology and Champion Microelectronic

0.57

Correlation Coefficient

Nuvoton Technology  Champion Microelectronic

Very weak diversification

The 3 months correlation between Nuvoton and Champion is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nuvoton Technology Corp and Champion Microelectronic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Microelectronic and Nuvoton Technology 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 Nuvoton Technology Corp are associated (or correlated) with Champion Microelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Microelectronic has no effect on the direction of Nuvoton Technology i.e., Nuvoton Technology and Champion Microelectronic go up and down completely randomly.

Pair Corralation between Nuvoton Technology and Champion Microelectronic

Assuming the 90 days trading horizon Nuvoton Technology is expected to generate 1.53 times less return on investment than Champion Microelectronic. But when comparing it to its historical volatility, Nuvoton Technology Corp is 1.13 times less risky than Champion Microelectronic. It trades about 0.02 of its potential returns per unit of risk. Champion Microelectronic Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,580  in Champion Microelectronic Corp on December 26, 2024 and sell it today you would earn a total of  80.00  from holding Champion Microelectronic Corp or generate 1.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Nuvoton Technology Corp  vs.  Champion Microelectronic Corp

Nuvoton Technology Corp

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvoton Technology Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Nuvoton Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Champion Microelectronic

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Microelectronic Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Champion Microelectronic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nuvoton Technology and Champion Microelectronic

The main advantage of trading using opposite Nuvoton Technology and Champion Microelectronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuvoton Technology position performs unexpectedly, Champion Microelectronic 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 Champion Microelectronic will offset losses from the drop in Champion Microelectronic's long position.

The idea behind Nuvoton Technology Corp and Champion Microelectronic 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.