Correlation Between Novatek Microelectronics and Strong H

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

Diversification Opportunities for Novatek Microelectronics and Strong H

-0.25

Correlation Coefficient

Novatek Microelectronics  Strong H

Very good diversification

The 3 months correlation between Novatek and Strong is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Strong H Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strong H Machinery 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 Strong H. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strong H Machinery has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Strong H go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Strong H

Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 4.37 times less return on investment than Strong H. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 1.02 times less risky than Strong H. It trades about 0.02 of its potential returns per unit of risk. Strong H Machinery is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,365  in Strong H Machinery on October 6, 2024 and sell it today you would earn a total of  195.00  from holding Strong H Machinery or generate 5.79% 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.  Strong H Machinery

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.

Strong H Machinery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strong H Machinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Strong H may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Novatek Microelectronics and Strong H

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

The idea behind Novatek Microelectronics Corp and Strong H Machinery 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.