Correlation Between Novatek Microelectronics and E Ink

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

Diversification Opportunities for Novatek Microelectronics and E Ink

0.61

Correlation Coefficient

Novatek Microelectronics  E Ink

Poor diversification

The 3 months correlation between Novatek and 8069 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and E Ink Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Ink Holdings 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 E Ink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Ink Holdings has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and E Ink go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and E Ink

Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 1.29 times less return on investment than E Ink. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 1.35 times less risky than E Ink. It trades about 0.06 of its potential returns per unit of risk. E Ink Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  16,147  in E Ink Holdings on September 17, 2024 and sell it today you would earn a total of  10,503  from holding E Ink Holdings or generate 65.05% 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.  E Ink Holdings

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.

E Ink Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Ink Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Novatek Microelectronics and E Ink

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

The idea behind Novatek Microelectronics Corp and E Ink Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.