Correlation Between ITEQ Corp and Novatek Microelectronics

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

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

Diversification Opportunities for ITEQ Corp and Novatek Microelectronics

-0.55

Correlation Coefficient

ITEQ Corp  Novatek Microelectronics

Excellent diversification

The 3 months correlation between ITEQ and Novatek is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding ITEQ 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 ITEQ Corp 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 ITEQ 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 ITEQ Corp i.e., ITEQ Corp and Novatek Microelectronics go up and down completely randomly.

Pair Corralation between ITEQ Corp and Novatek Microelectronics

Assuming the 90 days trading horizon ITEQ Corp is expected to generate 1.45 times more return on investment than Novatek Microelectronics. However, ITEQ Corp is 1.45 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 -0.02 per unit of risk. If you would invest  7,210  in ITEQ Corp on September 17, 2024 and sell it today you would earn a total of  550.00  from holding ITEQ Corp or generate 7.63% return on investment over 90 days.

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

ITEQ Corp  vs.  Novatek Microelectronics Corp

ITEQ Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ITEQ Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ITEQ Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with ITEQ Corp and Novatek Microelectronics

The main advantage of trading using opposite ITEQ Corp and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITEQ Corp 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 ITEQ 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.