Correlation Between Novatek Microelectronics and AVerMedia Technologies
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and AVerMedia Technologies 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 AVerMedia Technologies 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 AVerMedia Technologies, you can compare the effects of market volatilities on Novatek Microelectronics and AVerMedia Technologies 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 AVerMedia Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and AVerMedia Technologies.
Diversification Opportunities for Novatek Microelectronics and AVerMedia Technologies
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Novatek and AVerMedia is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and AVerMedia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVerMedia Technologies 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 AVerMedia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVerMedia Technologies has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and AVerMedia Technologies go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and AVerMedia Technologies
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 0.42 times more return on investment than AVerMedia Technologies. However, Novatek Microelectronics Corp is 2.4 times less risky than AVerMedia Technologies. It trades about 0.19 of its potential returns per unit of risk. AVerMedia Technologies is currently generating about 0.04 per unit of risk. If you would invest 50,000 in Novatek Microelectronics Corp on November 30, 2024 and sell it today you would earn a total of 4,500 from holding Novatek Microelectronics Corp or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.3% |
| Values | Daily Returns |
Novatek Microelectronics Corp vs. AVerMedia Technologies
Performance |
| Timeline |
| Novatek Microelectronics |
| AVerMedia Technologies |
Novatek Microelectronics and AVerMedia Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and AVerMedia Technologies
The main advantage of trading using opposite Novatek Microelectronics and AVerMedia Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, AVerMedia Technologies 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 AVerMedia Technologies will offset losses from the drop in AVerMedia Technologies' long position.| Novatek Microelectronics vs. ADLINK Technology | Novatek Microelectronics vs. Ching Feng Home | Novatek Microelectronics vs. Sitronix Technology Corp | Novatek Microelectronics vs. Landis Taipei Hotel |
| AVerMedia Technologies vs. Clevo Co | AVerMedia Technologies vs. Zinwell | AVerMedia Technologies vs. Gigastorage Corp | AVerMedia Technologies vs. Shuttle |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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