Correlation Between Novatek Microelectronics and Accton Technology
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Accton Technology 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 Accton Technology 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 Accton Technology Corp, you can compare the effects of market volatilities on Novatek Microelectronics and Accton Technology 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 Accton Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Accton Technology.
Diversification Opportunities for Novatek Microelectronics and Accton Technology
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Novatek and Accton is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Accton Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accton Technology Corp 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 Accton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accton Technology Corp has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Accton Technology go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Accton Technology
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the Accton Technology. But the stock apears to be less risky and, when comparing its historical volatility, Novatek Microelectronics Corp is 1.74 times less risky than Accton Technology. The stock trades about -0.15 of its potential returns per unit of risk. The Accton Technology Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 57,300 in Accton Technology Corp on August 27, 2024 and sell it today you would earn a total of 6,700 from holding Accton Technology Corp or generate 11.69% 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. Accton Technology Corp
Performance |
| Timeline |
| Novatek Microelectronics |
| Accton Technology Corp |
Novatek Microelectronics and Accton Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Accton Technology
The main advantage of trading using opposite Novatek Microelectronics and Accton Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Accton Technology 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 Accton Technology will offset losses from the drop in Accton Technology's long position.The idea behind Novatek Microelectronics Corp and Accton Technology Corp 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.
| Accton Technology vs. Novatek Microelectronics Corp | Accton Technology vs. Quanta Computer | Accton Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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