Correlation Between Universal Vision and Novatek Microelectronics

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

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

Diversification Opportunities for Universal Vision and Novatek Microelectronics

0.84

Correlation Coefficient

Universal Vision  Novatek Microelectronics

Very poor diversification

The 3 months correlation between Universal and Novatek is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Universal Vision Biotechnology and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Universal Vision 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 Universal Vision Biotechnology 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 Universal Vision i.e., Universal Vision and Novatek Microelectronics go up and down completely randomly.

Pair Corralation between Universal Vision and Novatek Microelectronics

Assuming the 90 days trading horizon Universal Vision Biotechnology is expected to generate 1.53 times more return on investment than Novatek Microelectronics. However, Universal Vision is 1.53 times more volatile than Novatek Microelectronics Corp. It trades about 0.13 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about 0.17 per unit of risk. If you would invest  19,487  in Universal Vision Biotechnology on December 27, 2024 and sell it today you would earn a total of  2,513  from holding Universal Vision Biotechnology or generate 12.9% return on investment over 90 days.

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

Universal Vision Biotechnology  vs.  Novatek Microelectronics Corp

Universal Vision Bio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Vision Biotechnology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Universal Vision showed solid returns over the last few months and may actually be approaching a breakup point.

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 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Universal Vision and Novatek Microelectronics

The main advantage of trading using opposite Universal Vision and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Vision 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 Universal Vision Biotechnology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.