Correlation Between Photronics and NVE

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

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

Diversification Opportunities for Photronics and NVE

0.89

Correlation Coefficient

Photronics  NVE

Very poor diversification

The 3 months correlation between Photronics and NVE is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Photronics and NVE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVE Corporation and Photronics 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 Photronics are associated (or correlated) with NVE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVE Corporation has no effect on the direction of Photronics i.e., Photronics and NVE go up and down completely randomly.

Pair Corralation between Photronics and NVE

Given the investment horizon of 90 days Photronics is expected to generate 0.75 times more return on investment than NVE. However, Photronics is 1.34 times less risky than NVE. It trades about -0.11 of its potential returns per unit of risk. NVE Corporation is currently generating about -0.13 per unit of risk. If you would invest  2,352  in Photronics on December 29, 2024 and sell it today you would lose (292.00) from holding Photronics or give up 12.41% of portfolio value over 90 days.

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

Photronics  vs.  NVE Corp.

Photronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Photronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic 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.

NVE Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVE Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental 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.

Pair Trading with Photronics and NVE

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

The idea behind Photronics and NVE Corporation 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.