Correlation Between WIN Semiconductors and Novatek Microelectronics

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

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

Diversification Opportunities for WIN Semiconductors and Novatek Microelectronics

0.11

Correlation Coefficient

WIN Semiconductors  Novatek Microelectronics

Average diversification

The 3 months correlation between WIN and Novatek is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding WIN Semiconductors and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and WIN Semiconductors 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 WIN Semiconductors 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 WIN Semiconductors i.e., WIN Semiconductors and Novatek Microelectronics go up and down completely randomly.

Pair Corralation between WIN Semiconductors and Novatek Microelectronics

Assuming the 90 days trading horizon WIN Semiconductors is expected to generate 16.58 times less return on investment than Novatek Microelectronics. In addition to that, WIN Semiconductors is 2.28 times more volatile than Novatek Microelectronics Corp. It trades about 0.0 of its total potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about 0.17 per unit of volatility. If you would invest  50,200  in Novatek Microelectronics Corp on December 27, 2024 and sell it today you would earn a total of  5,900  from holding Novatek Microelectronics Corp or generate 11.75% return on investment over 90 days.

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

WIN Semiconductors  vs.  Novatek Microelectronics Corp

WIN Semiconductors

Risk-Adjusted Performance

Very Weak

Over the last 90 days WIN Semiconductors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, WIN Semiconductors is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with WIN Semiconductors and Novatek Microelectronics

The main advantage of trading using opposite WIN Semiconductors and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WIN Semiconductors 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 WIN Semiconductors 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 Transaction History module to view history of all your transactions and understand their impact on performance.