Correlation Between Gemtek Technology and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Gemtek Technology and Novatek Microelectronics 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 Gemtek Technology and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gemtek Technology Co and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Gemtek Technology and Novatek Microelectronics 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 Gemtek Technology with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gemtek Technology and Novatek Microelectronics.
Diversification Opportunities for Gemtek Technology and Novatek Microelectronics
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gemtek and Novatek is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Gemtek Technology Co and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Gemtek Technology 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 Gemtek Technology Co are associated (or correlated) with Novatek Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novatek Microelectronics has no effect on the direction of Gemtek Technology i.e., Gemtek Technology and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Gemtek Technology and Novatek Microelectronics
Assuming the 90 days trading horizon Gemtek Technology Co is expected to generate 1.14 times more return on investment than Novatek Microelectronics. However, Gemtek Technology is 1.14 times more volatile than Novatek Microelectronics Corp. It trades about -0.07 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about -0.23 per unit of risk. If you would invest 3,665 in Gemtek Technology Co on August 26, 2024 and sell it today you would lose (100.00) from holding Gemtek Technology Co or give up 2.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gemtek Technology Co vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Gemtek Technology |
| Novatek Microelectronics |
Gemtek Technology and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gemtek Technology and Novatek Microelectronics
The main advantage of trading using opposite Gemtek Technology and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gemtek Technology position performs unexpectedly, Novatek Microelectronics 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 Novatek Microelectronics will offset losses from the drop in Novatek Microelectronics' long position.| Gemtek Technology vs. Novatek Microelectronics Corp | Gemtek Technology vs. Quanta Computer | Gemtek 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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