Correlation Between Everlight Electronics and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Everlight Electronics 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 Everlight Electronics and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Everlight Electronics Co and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Everlight Electronics 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 Everlight Electronics with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everlight Electronics and Novatek Microelectronics.
Diversification Opportunities for Everlight Electronics and Novatek Microelectronics
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Everlight and Novatek is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Everlight Electronics 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 Everlight Electronics 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 Everlight Electronics 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 Everlight Electronics i.e., Everlight Electronics and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Everlight Electronics and Novatek Microelectronics
Assuming the 90 days trading horizon Everlight Electronics is expected to generate 22.64 times less return on investment than Novatek Microelectronics. In addition to that, Everlight Electronics is 1.18 times more volatile than Novatek Microelectronics Corp. It trades about 0.01 of its total potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about 0.16 per unit of volatility. If you would invest 50,000 in Novatek Microelectronics Corp on October 31, 2024 and sell it today you would earn a total of 2,400 from holding Novatek Microelectronics Corp or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Everlight Electronics Co vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Everlight Electronics |
| Novatek Microelectronics |
Everlight Electronics and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Everlight Electronics and Novatek Microelectronics
The main advantage of trading using opposite Everlight Electronics and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everlight Electronics 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.| Everlight Electronics vs. Lite On Technology Corp | Everlight Electronics vs. AU Optronics | Everlight Electronics vs. Compal Electronics | Everlight Electronics vs. Catcher Technology Co |
| Novatek Microelectronics vs. Wha Yu Industrial | Novatek Microelectronics vs. CTBC Financial Holding | Novatek Microelectronics vs. O Bank Co | Novatek Microelectronics vs. Jentech Precision Industrial |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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