Correlation Between Novatek Microelectronics and Kinko Optical

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

Diversification Opportunities for Novatek Microelectronics and Kinko Optical

0.72

Correlation Coefficient

Novatek Microelectronics  Kinko Optical

Poor diversification

The 3 months correlation between Novatek and Kinko is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Kinko Optical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinko Optical 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 Kinko Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinko Optical has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Kinko Optical go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Kinko Optical

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 0.46 times more return on investment than Kinko Optical. However, Novatek Microelectronics Corp is 2.18 times less risky than Kinko Optical. It trades about 0.17 of its potential returns per unit of risk. Kinko Optical Co is currently generating about 0.07 per unit of risk. If you would invest  50,000  in Novatek Microelectronics Corp on December 30, 2024 and sell it today you would earn a total of  6,000  from holding Novatek Microelectronics Corp or generate 12.0% return on investment over 90 days.

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

Novatek Microelectronics Corp  vs.  Kinko Optical Co

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 13 (%) 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.

Kinko Optical

Risk-Adjusted Performance

Modest

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

Pair Trading with Novatek Microelectronics and Kinko Optical

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

The idea behind Novatek Microelectronics Corp and Kinko Optical 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.