Correlation Between Elitegroup Computer and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Elitegroup Computer 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 Elitegroup Computer and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elitegroup Computer Systems and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Elitegroup Computer 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 Elitegroup Computer with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elitegroup Computer and Novatek Microelectronics.
Diversification Opportunities for Elitegroup Computer and Novatek Microelectronics
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Elitegroup and Novatek is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Elitegroup Computer Systems and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Elitegroup Computer 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 Elitegroup Computer Systems 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 Elitegroup Computer i.e., Elitegroup Computer and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Elitegroup Computer and Novatek Microelectronics
Assuming the 90 days trading horizon Elitegroup Computer Systems is expected to generate 1.61 times more return on investment than Novatek Microelectronics. However, Elitegroup Computer is 1.61 times more volatile than Novatek Microelectronics Corp. It trades about 0.0 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about -0.18 per unit of risk. If you would invest 2,465 in Elitegroup Computer Systems on August 29, 2024 and sell it today you would lose (10.00) from holding Elitegroup Computer Systems or give up 0.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elitegroup Computer Systems vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Elitegroup Computer |
| Novatek Microelectronics |
Elitegroup Computer and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elitegroup Computer and Novatek Microelectronics
The main advantage of trading using opposite Elitegroup Computer and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elitegroup Computer 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.| Elitegroup Computer vs. Micro Star International Co | Elitegroup Computer vs. Gigabyte Technology Co | Elitegroup Computer vs. Compal Electronics | Elitegroup Computer vs. VIA Technologies |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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