Correlation Between Novatek Microelectronics and Taiwan Sakura

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

Diversification Opportunities for Novatek Microelectronics and Taiwan Sakura

0.67

Correlation Coefficient

Novatek Microelectronics  Taiwan Sakura

Poor diversification

The 3 months correlation between Novatek and Taiwan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and Taiwan Sakura Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Sakura Corp 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 Taiwan Sakura. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Sakura Corp has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and Taiwan Sakura go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and Taiwan Sakura

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to under-perform the Taiwan Sakura. In addition to that, Novatek Microelectronics is 1.54 times more volatile than Taiwan Sakura Corp. It trades about -0.1 of its total potential returns per unit of risk. Taiwan Sakura Corp is currently generating about -0.06 per unit of volatility. If you would invest  8,760  in Taiwan Sakura Corp on September 13, 2024 and sell it today you would lose (330.00) from holding Taiwan Sakura Corp or give up 3.77% 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.  Taiwan Sakura Corp

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.

Taiwan Sakura Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Sakura Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Sakura 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 Taiwan Sakura

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

The idea behind Novatek Microelectronics Corp and Taiwan Sakura Corp 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 Stocks Directory module to find actively traded stocks across global markets.