Correlation Between Novatek Microelectronics and Genius Electronic
Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and Genius Electronic 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 Genius Electronic 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 Genius Electronic Optical, you can compare the effects of market volatilities on Novatek Microelectronics and Genius Electronic 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 Genius Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and Genius Electronic.
Diversification Opportunities for Novatek Microelectronics and Genius Electronic
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novatek and Genius is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Genius Electronic Optical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genius Electronic Optical 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 Genius Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genius Electronic Optical has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Genius Electronic go up and down completely randomly.
Pair Corralation between Novatek Microelectronics and Genius Electronic
Assuming the 90 days trading horizon Novatek Microelectronics is expected to generate 1.86 times less return on investment than Genius Electronic. But when comparing it to its historical volatility, Novatek Microelectronics Corp is 1.2 times less risky than Genius Electronic. It trades about 0.02 of its potential returns per unit of risk. Genius Electronic Optical is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 38,639 in Genius Electronic Optical on September 2, 2024 and sell it today you would earn a total of 5,911 from holding Genius Electronic Optical or generate 15.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Novatek Microelectronics Corp vs. Genius Electronic Optical
Performance |
| Timeline |
| Novatek Microelectronics |
| Genius Electronic Optical |
Novatek Microelectronics and Genius Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novatek Microelectronics and Genius Electronic
The main advantage of trading using opposite Novatek Microelectronics and Genius Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, Genius Electronic 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 Genius Electronic will offset losses from the drop in Genius Electronic'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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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