Correlation Between Novatek Microelectronics and Compeq Manufacturing

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

Diversification Opportunities for Novatek Microelectronics and Compeq Manufacturing

0.41

Correlation Coefficient

Novatek Microelectronics  Compeq Manufacturing

Very weak diversification

The 3 months correlation between Novatek and Compeq is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Compeq Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compeq Manufacturing 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 Compeq Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compeq Manufacturing has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Compeq Manufacturing go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Compeq Manufacturing

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 0.67 times more return on investment than Compeq Manufacturing. However, Novatek Microelectronics Corp is 1.49 times less risky than Compeq Manufacturing. It trades about 0.18 of its potential returns per unit of risk. Compeq Manufacturing Co is currently generating about 0.05 per unit of risk. 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Novatek Microelectronics Corp  vs.  Compeq Manufacturing Co

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.

Compeq Manufacturing

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compeq Manufacturing Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Compeq Manufacturing may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Novatek Microelectronics and Compeq Manufacturing

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

The idea behind Novatek Microelectronics Corp and Compeq Manufacturing 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.