Correlation Between Compeq Manufacturing and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Compeq Manufacturing 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 Compeq Manufacturing and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compeq Manufacturing Co and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Compeq Manufacturing 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 Compeq Manufacturing with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compeq Manufacturing and Novatek Microelectronics.
Diversification Opportunities for Compeq Manufacturing and Novatek Microelectronics
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compeq and Novatek is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Compeq Manufacturing Co and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Compeq Manufacturing 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 Compeq Manufacturing Co 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 Compeq Manufacturing i.e., Compeq Manufacturing and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Compeq Manufacturing and Novatek Microelectronics
Assuming the 90 days trading horizon Compeq Manufacturing Co is expected to generate 1.73 times more return on investment than Novatek Microelectronics. However, Compeq Manufacturing is 1.73 times more volatile than Novatek Microelectronics Corp. It trades about -0.05 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about -0.14 per unit of risk. If you would invest 6,320 in Compeq Manufacturing Co on August 30, 2024 and sell it today you would lose (210.00) from holding Compeq Manufacturing Co or give up 3.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compeq Manufacturing Co vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Compeq Manufacturing |
| Novatek Microelectronics |
Compeq Manufacturing and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compeq Manufacturing and Novatek Microelectronics
The main advantage of trading using opposite Compeq Manufacturing and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compeq Manufacturing 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.| Compeq Manufacturing vs. Compal Electronics | Compeq Manufacturing vs. Winbond Electronics Corp | Compeq Manufacturing vs. Qisda Corp | Compeq Manufacturing vs. Macronix International Co |
Check out your portfolio center.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.
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