Correlation Between Novatek Microelectronics and Pan International

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

Diversification Opportunities for Novatek Microelectronics and Pan International

0.6

Correlation Coefficient

Novatek Microelectronics  Pan International

Poor diversification

The 3 months correlation between Novatek and Pan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Pan International Industrial C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan International 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 Pan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan International has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Pan International go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Pan International

Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 1.52 times less return on investment than Pan International. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 2.41 times less risky than Pan International. It trades about 0.18 of its potential returns per unit of risk. Pan International Industrial Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,080  in Pan International Industrial Corp on December 29, 2024 and sell it today you would earn a total of  690.00  from holding Pan International Industrial Corp or generate 16.91% return on investment over 90 days.

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

Novatek Microelectronics Corp  vs.  Pan International Industrial C

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.

Pan International

Risk-Adjusted Performance

OK

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

Pair Trading with Novatek Microelectronics and Pan International

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

The idea behind Novatek Microelectronics Corp and Pan International Industrial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.