Correlation Between Novatek Microelectronics and Taiwan Mask

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

Diversification Opportunities for Novatek Microelectronics and Taiwan Mask

0.17

Correlation Coefficient

Novatek Microelectronics  Taiwan Mask

Average diversification

The 3 months correlation between Novatek and Taiwan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Taiwan Mask Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Mask Corp 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 Taiwan Mask. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Mask Corp has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Taiwan Mask go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Taiwan Mask

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 0.71 times more return on investment than Taiwan Mask. However, Novatek Microelectronics Corp is 1.41 times less risky than Taiwan Mask. It trades about -0.05 of its potential returns per unit of risk. Taiwan Mask Corp is currently generating about -0.17 per unit of risk. If you would invest  53,300  in Novatek Microelectronics Corp on October 20, 2024 and sell it today you would lose (2,700) from holding Novatek Microelectronics Corp or give up 5.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Novatek Microelectronics Corp  vs.  Taiwan Mask Corp

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.

Taiwan Mask Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Mask Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Novatek Microelectronics and Taiwan Mask

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

The idea behind Novatek Microelectronics Corp and Taiwan Mask 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.