Correlation Between Novatek Microelectronics and Solid State

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

Diversification Opportunities for Novatek Microelectronics and Solid State

0.15

Correlation Coefficient

Novatek Microelectronics  Solid State

Average diversification

The 3 months correlation between Novatek and Solid is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Solid State System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid State System 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 Solid State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid State System has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Solid State go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Solid State

Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 36.6 times less return on investment than Solid State. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 28.61 times less risky than Solid State. It trades about 0.03 of its potential returns per unit of risk. Solid State System is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,135  in Solid State System on October 22, 2024 and sell it today you would lose (2,020) from holding Solid State System or give up 48.85% of portfolio value over 90 days.

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

Novatek Microelectronics Corp  vs.  Solid State System

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.

Solid State System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid State System 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 Solid State

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

The idea behind Novatek Microelectronics Corp and Solid State System 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.