Correlation Between Novatek Microelectronics and TPK Holding

Can any of the company-specific risk be diversified away by investing in both Novatek Microelectronics and TPK Holding 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 TPK Holding 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 TPK Holding Co, you can compare the effects of market volatilities on Novatek Microelectronics and TPK Holding 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 TPK Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novatek Microelectronics and TPK Holding.

Diversification Opportunities for Novatek Microelectronics and TPK Holding

0.75

Correlation Coefficient

Novatek Microelectronics  TPK Holding

Poor diversification

The 3 months correlation between Novatek and TPK is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and TPK Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPK Holding 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 TPK Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPK Holding has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and TPK Holding go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and TPK Holding

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 0.72 times more return on investment than TPK Holding. However, Novatek Microelectronics Corp is 1.4 times less risky than TPK Holding. It trades about -0.1 of its potential returns per unit of risk. TPK Holding Co is currently generating about -0.09 per unit of risk. If you would invest  53,200  in Novatek Microelectronics Corp on September 14, 2024 and sell it today you would lose (5,000) from holding Novatek Microelectronics Corp or give up 9.4% of portfolio value over 90 days.

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

Novatek Microelectronics Corp  vs.  TPK Holding Co

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.

TPK Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPK Holding Co 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 TPK Holding

The main advantage of trading using opposite Novatek Microelectronics and TPK Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novatek Microelectronics position performs unexpectedly, TPK Holding 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 TPK Holding will offset losses from the drop in TPK Holding's long position.

The idea behind Novatek Microelectronics Corp and TPK Holding Co 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.