Correlation Between Nova Lifestyle and FGI Industries

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

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

Diversification Opportunities for Nova Lifestyle and FGI Industries

-0.14

Correlation Coefficient

Nova Lifestyle  FGI Industries

Good diversification

The 3 months correlation between Nova and FGI is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nova Lifestyle I and FGI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FGI Industries and Nova Lifestyle 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 Nova Lifestyle I are associated (or correlated) with FGI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FGI Industries has no effect on the direction of Nova Lifestyle i.e., Nova Lifestyle and FGI Industries go up and down completely randomly.

Pair Corralation between Nova Lifestyle and FGI Industries

Given the investment horizon of 90 days Nova Lifestyle I is expected to under-perform the FGI Industries. In addition to that, Nova Lifestyle is 1.12 times more volatile than FGI Industries. It trades about -0.56 of its total potential returns per unit of risk. FGI Industries is currently generating about -0.06 per unit of volatility. If you would invest  93.00  in FGI Industries on September 12, 2024 and sell it today you would lose (10.10) from holding FGI Industries or give up 10.86% of portfolio value over 90 days.

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

Nova Lifestyle I  vs.  FGI Industries

Nova Lifestyle I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Lifestyle I 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 fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

FGI Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FGI Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, FGI Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nova Lifestyle and FGI Industries

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

The idea behind Nova Lifestyle I and FGI Industries 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.