Correlation Between Holtek Semiconductor and Nuvoton Technology

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

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

Diversification Opportunities for Holtek Semiconductor and Nuvoton Technology

0.25

Correlation Coefficient

Holtek Semiconductor  Nuvoton Technology

Modest diversification

The 3 months correlation between Holtek and Nuvoton is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Holtek Semiconductor and Nuvoton Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvoton Technology Corp and Holtek 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 Holtek Semiconductor are associated (or correlated) with Nuvoton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvoton Technology Corp has no effect on the direction of Holtek Semiconductor i.e., Holtek Semiconductor and Nuvoton Technology go up and down completely randomly.

Pair Corralation between Holtek Semiconductor and Nuvoton Technology

Assuming the 90 days trading horizon Holtek Semiconductor is expected to generate 2.79 times less return on investment than Nuvoton Technology. But when comparing it to its historical volatility, Holtek Semiconductor is 1.36 times less risky than Nuvoton Technology. It trades about 0.04 of its potential returns per unit of risk. Nuvoton Technology Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8,080  in Nuvoton Technology Corp on September 13, 2024 and sell it today you would earn a total of  1,200  from holding Nuvoton Technology Corp or generate 14.85% return on investment over 90 days.

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

Holtek Semiconductor  vs.  Nuvoton Technology Corp

Holtek Semiconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holtek Semiconductor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Holtek Semiconductor is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Nuvoton Technology Corp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvoton Technology Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nuvoton Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holtek Semiconductor and Nuvoton Technology

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

The idea behind Holtek Semiconductor and Nuvoton Technology 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.