Correlation Between Novatek Microelectronics and Compal Electronics
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Compal Electronics 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 Compal Electronics 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 Compal Electronics, you can compare the effects of market volatilities on Novatek Microelectronics and Compal Electronics 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 Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Compal Electronics.
Diversification Opportunities for Novatek Microelectronics and Compal Electronics
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Novatek and Compal is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics 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 Compal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compal Electronics has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Compal Electronics go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Compal Electronics
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the Compal Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Novatek Microelectronics Corp is 1.11 times less risky than Compal Electronics. The stock trades about -0.13 of its potential returns per unit of risk. The Compal Electronics is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 3,330 in Compal Electronics on August 30, 2024 and sell it today you would earn a total of 430.00 from holding Compal Electronics or generate 12.91% 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. Compal Electronics
Performance |
| Timeline |
| Novatek Microelectronics |
| Compal Electronics |
Novatek Microelectronics and Compal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Compal Electronics
The main advantage of trading using opposite Novatek Microelectronics and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Compal Electronics 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 Compal Electronics will offset losses from the drop in Compal Electronics' long position.The idea behind Novatek Microelectronics Corp and Compal Electronics 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.
| Compal Electronics vs. Quanta Computer | Compal Electronics vs. Inventec Corp | Compal Electronics vs. Asustek Computer | Compal Electronics vs. Acer Inc |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like |