Correlation Between U Tech and Novatek Microelectronics

Can any of the company-specific risk be diversified away by investing in both U Tech and Novatek Microelectronics 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 U Tech and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between U Tech Media Corp and Novatek Microelectronics Corp, you can compare the effects of market volatilities on U Tech and Novatek Microelectronics 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 U Tech with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Tech and Novatek Microelectronics.

Diversification Opportunities for U Tech and Novatek Microelectronics

0.41

Correlation Coefficient

U Tech  Novatek Microelectronics

Very weak diversification

The 3 months correlation between 3050 and Novatek is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding U Tech Media Corp and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and U Tech 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 U Tech Media Corp are associated (or correlated) with Novatek Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novatek Microelectronics has no effect on the direction of U Tech i.e., U Tech and Novatek Microelectronics go up and down completely randomly.

Pair Corralation between U Tech and Novatek Microelectronics

Assuming the 90 days trading horizon U Tech Media Corp is expected to generate 1.38 times more return on investment than Novatek Microelectronics. However, U Tech is 1.38 times more volatile than Novatek Microelectronics Corp. It trades about -0.07 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about -0.1 per unit of risk. If you would invest  2,000  in U Tech Media Corp on September 13, 2024 and sell it today you would lose (180.00) from holding U Tech Media Corp or give up 9.0% of portfolio value over 90 days.

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

U Tech Media Corp  vs.  Novatek Microelectronics Corp

U Tech Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days U Tech Media Corp 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.

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 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 U Tech and Novatek Microelectronics

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

The idea behind U Tech Media Corp and Novatek Microelectronics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.