Correlation Between Novatek Microelectronics and Inmax Holding

Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Inmax Holding 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 Inmax Holding 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 Inmax Holding Co, you can compare the effects of market volatilities on Novatek Microelectronics and Inmax Holding 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 Inmax Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Inmax Holding.

Diversification Opportunities for Novatek Microelectronics and Inmax Holding

-0.71

Correlation Coefficient

Novatek Microelectronics  Inmax Holding

Pay attention - limited upside

The 3 months correlation between Novatek and Inmax is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Inmax Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inmax Holding 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 Inmax Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inmax Holding has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Inmax Holding go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Inmax Holding

Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 4.43 times less return on investment than Inmax Holding. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 1.87 times less risky than Inmax Holding. It trades about 0.06 of its potential returns per unit of risk. Inmax Holding Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,250  in Inmax Holding Co on October 6, 2024 and sell it today you would earn a total of  350.00  from holding Inmax Holding Co or generate 6.67% return on investment over 90 days.

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

Novatek Microelectronics Corp  vs.  Inmax Holding Co

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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Inmax Holding

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inmax Holding Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Inmax Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novatek Microelectronics and Inmax Holding

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

The idea behind Novatek Microelectronics Corp and Inmax Holding Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .