Correlation Between Novatek Microelectronics and Advanced Ceramic

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

Diversification Opportunities for Novatek Microelectronics and Advanced Ceramic

0.12

Correlation Coefficient

Novatek Microelectronics  Advanced Ceramic

Average diversification

The 3 months correlation between Novatek and Advanced is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Advanced Ceramic X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Ceramic X 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 Advanced Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Ceramic X has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Advanced Ceramic go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Advanced Ceramic

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the Advanced Ceramic. But the stock apears to be less risky and, when comparing its historical volatility, Novatek Microelectronics Corp is 1.73 times less risky than Advanced Ceramic. The stock trades about -0.09 of its potential returns per unit of risk. The Advanced Ceramic X is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  16,250  in Advanced Ceramic X on September 12, 2024 and sell it today you would earn a total of  1,550  from holding Advanced Ceramic X or generate 9.54% return on investment over 90 days.

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

Novatek Microelectronics Corp  vs.  Advanced Ceramic X

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.

Advanced Ceramic X

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Ceramic X are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Ceramic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Novatek Microelectronics and Advanced Ceramic

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

The idea behind Novatek Microelectronics Corp and Advanced Ceramic X 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.