Correlation Between Sitronix Technology and Novatek Microelectronics

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Can any of the company-specific risk be diversified away by investing in both Sitronix Technology 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 Sitronix Technology and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sitronix Technology Corp and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Sitronix Technology 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 Sitronix Technology with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sitronix Technology and Novatek Microelectronics.

Diversification Opportunities for Sitronix Technology and Novatek Microelectronics

SitronixNovatekDiversified AwaySitronixNovatekDiversified Away100%
0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sitronix and Novatek is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sitronix Technology 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 Sitronix Technology 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 Sitronix Technology 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 Sitronix Technology i.e., Sitronix Technology and Novatek Microelectronics go up and down completely randomly.

Pair Corralation between Sitronix Technology and Novatek Microelectronics

Assuming the 90 days trading horizon Sitronix Technology Corp is expected to generate 0.95 times more return on investment than Novatek Microelectronics. However, Sitronix Technology Corp is 1.05 times less risky than Novatek Microelectronics. It trades about -0.06 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about -0.08 per unit of risk. If you would invest  22,000  in Sitronix Technology Corp on September 4, 2024 and sell it today you would lose (1,350) from holding Sitronix Technology Corp or give up 6.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sitronix Technology Corp  vs.  Novatek Microelectronics Corp

 Performance 
JavaScript chart by amCharts 3.21.15SepOctNov -10-50
JavaScript chart by amCharts 3.21.158016 3034
       Timeline  
Sitronix Technology Corp 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Sitronix Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sitronix Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec205210215220225230235240
Novatek Microelectronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec480490500510520530540

Sitronix Technology and Novatek Microelectronics Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.54-1.93-1.32-0.71-0.09480.481.061.642.222.8 0.080.100.120.140.160.18
JavaScript chart by amCharts 3.21.158016 3034
       Returns  

Pair Trading with Sitronix Technology and Novatek Microelectronics

The main advantage of trading using opposite Sitronix Technology and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sitronix Technology 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 Sitronix Technology 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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