Correlation Between Novatek Microelectronics and Sports Gear

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

Diversification Opportunities for Novatek Microelectronics and Sports Gear

-0.82

Correlation Coefficient

Novatek Microelectronics  Sports Gear

Pay attention - limited upside

The 3 months correlation between Novatek and Sports is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Sports Gear Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Gear 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 Sports Gear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Gear has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Sports Gear go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Sports Gear

Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 2.88 times less return on investment than Sports Gear. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 1.09 times less risky than Sports Gear. It trades about 0.03 of its potential returns per unit of risk. Sports Gear Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,348  in Sports Gear Co on October 5, 2024 and sell it today you would earn a total of  6,052  from holding Sports Gear Co or generate 95.34% return on investment over 90 days.

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

Novatek Microelectronics Corp  vs.  Sports Gear Co

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.

Sports Gear

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sports Gear Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sports Gear showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novatek Microelectronics and Sports Gear

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

The idea behind Novatek Microelectronics Corp and Sports Gear 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.