Correlation Between Novatek Microelectronics and CTCI Corp

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

Diversification Opportunities for Novatek Microelectronics and CTCI Corp

0.85

Correlation Coefficient

Novatek Microelectronics  CTCI Corp

Very poor diversification

The 3 months correlation between Novatek and CTCI is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Novatek Microelectronics Corp and CTCI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTCI 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 CTCI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTCI Corp has no effect on the direction of Novatek Microelectronics i.e., Novatek Microelectronics and CTCI Corp go up and down completely randomly.

Pair Corralation between Novatek Microelectronics and CTCI Corp

Assuming the 90 days trading horizon Novatek Microelectronics Corp is expected to generate 1.78 times more return on investment than CTCI Corp. However, Novatek Microelectronics is 1.78 times more volatile than CTCI Corp. It trades about -0.1 of its potential returns per unit of risk. CTCI Corp is currently generating about -0.37 per unit of risk. If you would invest  53,400  in Novatek Microelectronics Corp on September 13, 2024 and sell it today you would lose (4,900) from holding Novatek Microelectronics Corp or give up 9.18% of portfolio value over 90 days.

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

Novatek Microelectronics Corp  vs.  CTCI 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.

CTCI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTCI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Novatek Microelectronics and CTCI Corp

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

The idea behind Novatek Microelectronics Corp and CTCI 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.