Correlation Between Novatek Microelectronics and Thunder Tiger

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

Diversification Opportunities for Novatek Microelectronics and Thunder Tiger

0.31

Correlation Coefficient

Novatek Microelectronics  Thunder Tiger

Weak diversification

The 3 months correlation between Novatek and Thunder is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Thunder Tiger Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunder Tiger Corp 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 Thunder Tiger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunder Tiger Corp has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Thunder Tiger go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Thunder Tiger

Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 1.52 times less return on investment than Thunder Tiger. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 2.34 times less risky than Thunder Tiger. It trades about 0.18 of its potential returns per unit of risk. Thunder Tiger Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,110  in Thunder Tiger Corp on December 24, 2024 and sell it today you would earn a total of  1,080  from holding Thunder Tiger Corp or generate 17.68% return on investment over 90 days.

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

Novatek Microelectronics Corp  vs.  Thunder Tiger Corp

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 14 (%) 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.

Thunder Tiger Corp

Risk-Adjusted Performance

OK

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

Pair Trading with Novatek Microelectronics and Thunder Tiger

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

The idea behind Novatek Microelectronics Corp and Thunder Tiger Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..