Correlation Between Novatek Microelectronics and Great Computer

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

Diversification Opportunities for Novatek Microelectronics and Great Computer

-0.81

Correlation Coefficient

Novatek Microelectronics  Great Computer

Pay attention - limited upside

The 3 months correlation between Novatek and Great is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Great Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Computer 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 Great Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Computer has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Great Computer go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Great Computer

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the Great Computer. But the stock apears to be less risky and, when comparing its historical volatility, Novatek Microelectronics Corp is 2.88 times less risky than Great Computer. The stock trades about -0.09 of its potential returns per unit of risk. The Great Computer is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,530  in Great Computer on September 12, 2024 and sell it today you would earn a total of  185.00  from holding Great Computer or generate 12.09% return on investment over 90 days.

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

Novatek Microelectronics Corp  vs.  Great Computer

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.

Great Computer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Computer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Great Computer showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novatek Microelectronics and Great Computer

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

The idea behind Novatek Microelectronics Corp and Great Computer 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.