Correlation Between Optotech Corp and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Optotech 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 Optotech 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 Optotech Corp and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Optotech 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 Optotech Corp with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optotech Corp and Novatek Microelectronics.
Diversification Opportunities for Optotech Corp and Novatek Microelectronics
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Optotech and Novatek is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Optotech 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 Optotech 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 Optotech 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 Optotech Corp i.e., Optotech Corp and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Optotech Corp and Novatek Microelectronics
Assuming the 90 days trading horizon Optotech Corp is expected to under-perform the Novatek Microelectronics. In addition to that, Optotech Corp is 1.23 times more volatile than Novatek Microelectronics Corp. It trades about -0.43 of its total potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about -0.24 per unit of volatility. If you would invest 51,500 in Novatek Microelectronics Corp on August 27, 2024 and sell it today you would lose (3,500) from holding Novatek Microelectronics Corp or give up 6.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Optotech Corp vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Optotech Corp |
| Novatek Microelectronics |
Optotech Corp and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optotech Corp and Novatek Microelectronics
The main advantage of trading using opposite Optotech Corp and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optotech 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.| Optotech Corp vs. Novatek Microelectronics Corp | Optotech Corp vs. Quanta Computer | Optotech Corp vs. United Microelectronics |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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