Correlation Between NAPCO Security and Iveda Solutions

Can any of the company-specific risk be diversified away by investing in both NAPCO Security and Iveda Solutions 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 NAPCO Security and Iveda Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NAPCO Security Technologies and Iveda Solutions, you can compare the effects of market volatilities on NAPCO Security and Iveda Solutions 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 NAPCO Security with a short position of Iveda Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAPCO Security and Iveda Solutions.

Diversification Opportunities for NAPCO Security and Iveda Solutions

0.69

Correlation Coefficient

NAPCO Security  Iveda Solutions

Poor diversification

The 3 months correlation between NAPCO and Iveda is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NAPCO Security Technologies and Iveda Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iveda Solutions and NAPCO Security 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 NAPCO Security Technologies are associated (or correlated) with Iveda Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iveda Solutions has no effect on the direction of NAPCO Security i.e., NAPCO Security and Iveda Solutions go up and down completely randomly.

Pair Corralation between NAPCO Security and Iveda Solutions

Given the investment horizon of 90 days NAPCO Security Technologies is expected to generate 0.37 times more return on investment than Iveda Solutions. However, NAPCO Security Technologies is 2.69 times less risky than Iveda Solutions. It trades about -0.14 of its potential returns per unit of risk. Iveda Solutions is currently generating about -0.07 per unit of risk. If you would invest  3,532  in NAPCO Security Technologies on December 27, 2024 and sell it today you would lose (1,150) from holding NAPCO Security Technologies or give up 32.56% of portfolio value over 90 days.

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

NAPCO Security Technologies  vs.  Iveda Solutions

NAPCO Security Techn

Risk-Adjusted Performance

Very Weak

Over the last 90 days NAPCO Security Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Iveda Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iveda Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NAPCO Security and Iveda Solutions

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

The idea behind NAPCO Security Technologies and Iveda Solutions 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.