Correlation Between Novatek Microelectronics and Solid State
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Solid State 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 Solid State 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 Solid State System, you can compare the effects of market volatilities on Novatek Microelectronics and Solid State 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 Solid State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Solid State.
Diversification Opportunities for Novatek Microelectronics and Solid State
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Novatek and Solid is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Solid State System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid State System 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 Solid State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid State System has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Solid State go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Solid State
Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 0.78 times more return on investment than Solid State. However, Novatek Microelectronics Corp is 1.28 times less risky than Solid State. It trades about -0.1 of its potential returns per unit of risk. Solid State System is currently generating about -0.15 per unit of risk. If you would invest 50,100 in Novatek Microelectronics Corp on September 2, 2024 and sell it today you would lose (1,700) from holding Novatek Microelectronics Corp or give up 3.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novatek Microelectronics Corp vs. Solid State System
Performance |
| Timeline |
| Novatek Microelectronics |
| Solid State System |
Novatek Microelectronics and Solid State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Solid State
The main advantage of trading using opposite Novatek Microelectronics and Solid State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Solid State 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 Solid State will offset losses from the drop in Solid State's long position.| Novatek Microelectronics vs. United Microelectronics | Novatek Microelectronics vs. Winbond Electronics Corp |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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