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

0.8

Correlation Coefficient

Novatek Microelectronics  Genius Electronic

Very poor diversification

The 3 months correlation between Novatek and Genius is 0.8. 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 Corp is expected to under-perform the Genius Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Novatek Microelectronics Corp is 1.14 times less risky than Genius Electronic. The stock trades about -0.1 of its potential returns per unit of risk. The Genius Electronic Optical is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  49,150  in Genius Electronic Optical on September 13, 2024 and sell it today you would lose (3,550) from holding Genius Electronic Optical or give up 7.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Novatek Microelectronics Corp  vs.  Genius Electronic Optical

Novatek Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novatek Microelectronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Genius Electronic Optical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genius Electronic Optical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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.

The idea behind Novatek Microelectronics Corp and Genius Electronic Optical 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.