Correlation Between Novatek Microelectronics and Nan Yang

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

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

Diversification Opportunities for Novatek Microelectronics and Nan Yang

0.26

Correlation Coefficient

Novatek Microelectronics  Nan Yang

Modest diversification

The 3 months correlation between Novatek and Nan is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Nan Yang Dyeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Yang Dyeing and Novatek Microelectronics 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 Novatek Microelectronics Corp are associated (or correlated) with Nan Yang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Yang Dyeing has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Nan Yang go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Nan Yang

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 2.08 times more return on investment than Nan Yang. However, Novatek Microelectronics is 2.08 times more volatile than Nan Yang Dyeing. It trades about 0.06 of its potential returns per unit of risk. Nan Yang Dyeing is currently generating about -0.29 per unit of risk. If you would invest  48,750  in Novatek Microelectronics Corp on October 6, 2024 and sell it today you would earn a total of  700.00  from holding Novatek Microelectronics Corp or generate 1.44% return on investment over 90 days.

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

Novatek Microelectronics Corp  vs.  Nan Yang Dyeing

Novatek Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nan Yang Dyeing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Novatek Microelectronics and Nan Yang

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

The idea behind Novatek Microelectronics Corp and Nan Yang Dyeing 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.