Correlation Between Novatek Microelectronics and Chenming Mold

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

Diversification Opportunities for Novatek Microelectronics and Chenming Mold

-0.17

Correlation Coefficient

Novatek Microelectronics  Chenming Mold

Good diversification

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

Pair Corralation between Novatek Microelectronics and Chenming Mold

Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 6.42 times less return on investment than Chenming Mold. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 2.29 times less risky than Chenming Mold. It trades about 0.04 of its potential returns per unit of risk. Chenming Mold Industrial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,160  in Chenming Mold Industrial on December 4, 2024 and sell it today you would earn a total of  11,190  from holding Chenming Mold Industrial or generate 518.06% 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.  Chenming Mold Industrial

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.

Chenming Mold Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chenming Mold Industrial 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.

Pair Trading with Novatek Microelectronics and Chenming Mold

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

The idea behind Novatek Microelectronics Corp and Chenming Mold Industrial 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.