Correlation Between Novatek Microelectronics and Maxigen Biotech

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

Diversification Opportunities for Novatek Microelectronics and Maxigen Biotech

0.48

Correlation Coefficient

Novatek Microelectronics  Maxigen Biotech

Very weak diversification

The 3 months correlation between Novatek and Maxigen is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Maxigen Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxigen Biotech 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 Maxigen Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxigen Biotech has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Maxigen Biotech go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Maxigen Biotech

Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 1.42 times less return on investment than Maxigen Biotech. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 1.58 times less risky than Maxigen Biotech. It trades about 0.17 of its potential returns per unit of risk. Maxigen Biotech is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,480  in Maxigen Biotech on November 30, 2024 and sell it today you would earn a total of  790.00  from holding Maxigen Biotech or generate 17.63% return on investment over 90 days.

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

Novatek Microelectronics Corp  vs.  Maxigen Biotech

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 13 (%) 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.

Maxigen Biotech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Maxigen Biotech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Maxigen Biotech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novatek Microelectronics and Maxigen Biotech

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

The idea behind Novatek Microelectronics Corp and Maxigen Biotech 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.