Correlation Between Nuvoton Technology and Parade Technologies

Can any of the company-specific risk be diversified away by investing in both Nuvoton Technology and Parade Technologies 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 Parade Technologies 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 Parade Technologies, you can compare the effects of market volatilities on Nuvoton Technology and Parade Technologies 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 Parade Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuvoton Technology and Parade Technologies.

Diversification Opportunities for Nuvoton Technology and Parade Technologies

-0.18

Correlation Coefficient

Nuvoton Technology  Parade Technologies

Good diversification

The 3 months correlation between Nuvoton and Parade is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nuvoton Technology Corp and Parade Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parade Technologies 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 Parade Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parade Technologies has no effect on the direction of Nuvoton Technology i.e., Nuvoton Technology and Parade Technologies go up and down completely randomly.

Pair Corralation between Nuvoton Technology and Parade Technologies

Assuming the 90 days trading horizon Nuvoton Technology Corp is expected to under-perform the Parade Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Nuvoton Technology Corp is 1.27 times less risky than Parade Technologies. The stock trades about -0.03 of its potential returns per unit of risk. The Parade Technologies is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  92,012  in Parade Technologies on October 23, 2024 and sell it today you would lose (21,812) from holding Parade Technologies or give up 23.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Nuvoton Technology Corp  vs.  Parade Technologies

Nuvoton Technology Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvoton Technology Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nuvoton Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Parade Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parade Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Parade Technologies 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 Parade Technologies

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

The idea behind Nuvoton Technology Corp and Parade Technologies 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.