Correlation Between Novatek Microelectronics and Excelsior Medical

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

Diversification Opportunities for Novatek Microelectronics and Excelsior Medical

0.66

Correlation Coefficient

Novatek Microelectronics  Excelsior Medical

Poor diversification

The 3 months correlation between Novatek and Excelsior is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Excelsior Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excelsior Medical 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 Excelsior Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excelsior Medical has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Excelsior Medical go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Excelsior Medical

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the Excelsior Medical. In addition to that, Novatek Microelectronics is 4.58 times more volatile than Excelsior Medical Co. It trades about -0.08 of its total potential returns per unit of risk. Excelsior Medical Co is currently generating about -0.03 per unit of volatility. If you would invest  8,710  in Excelsior Medical Co on September 4, 2024 and sell it today you would lose (50.00) from holding Excelsior Medical Co or give up 0.57% 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.  Excelsior Medical 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.

Excelsior Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Excelsior Medical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Excelsior Medical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Novatek Microelectronics and Excelsior Medical

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

The idea behind Novatek Microelectronics Corp and Excelsior Medical 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.