Correlation Between Novatek Microelectronics and Great Wall
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Great Wall 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 Novatek Microelectronics and Great Wall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novatek Microelectronics Corp and Great Wall Enterprise, you can compare the effects of market volatilities on Novatek Microelectronics and Great Wall 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 Novatek Microelectronics with a short position of Great Wall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Great Wall.
Diversification Opportunities for Novatek Microelectronics and Great Wall
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Novatek and Great is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Great Wall Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wall Enterprise and Novatek Microelectronics 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 Novatek Microelectronics Corp are associated (or correlated) with Great Wall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wall Enterprise has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Great Wall go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Great Wall
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the Great Wall. In addition to that, Novatek Microelectronics is 2.09 times more volatile than Great Wall Enterprise. It trades about -0.1 of its total potential returns per unit of risk. Great Wall Enterprise is currently generating about 0.11 per unit of volatility. If you would invest 5,100 in Great Wall Enterprise on September 12, 2024 and sell it today you would earn a total of 250.00 from holding Great Wall Enterprise or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novatek Microelectronics Corp vs. Great Wall Enterprise
Performance |
| Timeline |
| Novatek Microelectronics |
| Great Wall Enterprise |
Novatek Microelectronics and Great Wall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Great Wall
The main advantage of trading using opposite Novatek Microelectronics and Great Wall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Great Wall 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 Great Wall will offset losses from the drop in Great Wall's long position.The idea behind Novatek Microelectronics Corp and Great Wall Enterprise 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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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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