Correlation Between Taisun Enterprise and Novatek Microelectronics

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

By analyzing existing cross correlation between Taisun Enterprise Co and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Taisun Enterprise and Novatek Microelectronics 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 Taisun Enterprise with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taisun Enterprise and Novatek Microelectronics.

Diversification Opportunities for Taisun Enterprise and Novatek Microelectronics

-0.5

Correlation Coefficient

Taisun Enterprise  Novatek Microelectronics

Very good diversification

The 3 months correlation between Taisun and Novatek is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Taisun Enterprise Co and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Taisun Enterprise 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 Taisun Enterprise Co are associated (or correlated) with Novatek Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novatek Microelectronics has no effect on the direction of Taisun Enterprise i.e., Taisun Enterprise and Novatek Microelectronics go up and down completely randomly.

Pair Corralation between Taisun Enterprise and Novatek Microelectronics

Assuming the 90 days trading horizon Taisun Enterprise Co is expected to under-perform the Novatek Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Taisun Enterprise Co is 1.65 times less risky than Novatek Microelectronics. The stock trades about -0.09 of its potential returns per unit of risk. The Novatek Microelectronics Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  48,400  in Novatek Microelectronics Corp on December 4, 2024 and sell it today you would earn a total of  6,300  from holding Novatek Microelectronics Corp or generate 13.02% return on investment over 90 days.

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

Taisun Enterprise Co  vs.  Novatek Microelectronics Corp

Taisun Enterprise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taisun Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taisun Enterprise is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Novatek Microelectronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Novatek Microelectronics Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Novatek Microelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taisun Enterprise and Novatek Microelectronics

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

The idea behind Taisun Enterprise Co and Novatek Microelectronics 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..