Correlation Between Novatek Microelectronics and San Fu

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

Diversification Opportunities for Novatek Microelectronics and San Fu

0.11

Correlation Coefficient

Novatek Microelectronics  San Fu

Average diversification

The 3 months correlation between Novatek and San is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and San Fu Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Fu Chemical 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 San Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Fu Chemical has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and San Fu go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and San Fu

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the San Fu. But the stock apears to be less risky and, when comparing its historical volatility, Novatek Microelectronics Corp is 1.84 times less risky than San Fu. The stock trades about -0.09 of its potential returns per unit of risk. The San Fu Chemical is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12,600  in San Fu Chemical on September 12, 2024 and sell it today you would earn a total of  1,200  from holding San Fu Chemical or generate 9.52% return on investment over 90 days.

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

Novatek Microelectronics Corp  vs.  San Fu Chemical

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.

San Fu Chemical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in San Fu Chemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, San Fu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Novatek Microelectronics and San Fu

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

The idea behind Novatek Microelectronics Corp and San Fu Chemical 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.