Correlation Between Novatek Microelectronics and Da Cin

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

Diversification Opportunities for Novatek Microelectronics and Da Cin

-0.05

Correlation Coefficient

Novatek Microelectronics  Da Cin

Good diversification

The 3 months correlation between Novatek and 2535 is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Da Cin Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Da Cin Construction 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 Da Cin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Da Cin Construction has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Da Cin go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Da Cin

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the Da Cin. In addition to that, Novatek Microelectronics is 1.34 times more volatile than Da Cin Construction Co. It trades about -0.09 of its total potential returns per unit of risk. Da Cin Construction Co is currently generating about 0.05 per unit of volatility. If you would invest  5,250  in Da Cin Construction Co on September 15, 2024 and sell it today you would earn a total of  180.00  from holding Da Cin Construction Co or generate 3.43% return on investment over 90 days.

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

Novatek Microelectronics Corp  vs.  Da Cin Construction 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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Da Cin Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Da Cin Construction Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Da Cin is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Novatek Microelectronics and Da Cin

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

The idea behind Novatek Microelectronics Corp and Da Cin Construction 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.