Correlation Between Taiwan Speciality and Novatek Microelectronics

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Taiwan Speciality and Novatek Microelectronics 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 Taiwan Speciality and Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Speciality Chemicals and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Taiwan Speciality and Novatek Microelectronics 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 Taiwan Speciality with a short position of Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Speciality and Novatek Microelectronics.

Diversification Opportunities for Taiwan Speciality and Novatek Microelectronics

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Taiwan and Novatek is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Speciality Chemicals and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics and Taiwan Speciality 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 Taiwan Speciality Chemicals are associated (or correlated) with Novatek Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novatek Microelectronics has no effect on the direction of Taiwan Speciality i.e., Taiwan Speciality and Novatek Microelectronics go up and down completely randomly.

Pair Corralation between Taiwan Speciality and Novatek Microelectronics

Assuming the 90 days trading horizon Taiwan Speciality Chemicals is expected to under-perform the Novatek Microelectronics. In addition to that, Taiwan Speciality is 1.63 times more volatile than Novatek Microelectronics Corp. It trades about -0.07 of its total potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about -0.06 per unit of volatility. If you would invest  52,300  in Novatek Microelectronics Corp on September 26, 2024 and sell it today you would lose (2,850) from holding Novatek Microelectronics Corp or give up 5.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Taiwan Speciality Chemicals  vs.  Novatek Microelectronics Corp

 Performance 
       Timeline  
Taiwan Speciality 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Taiwan Speciality Chemicals 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.
Novatek Microelectronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 fairly stable basic indicators, Novatek Microelectronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taiwan Speciality and Novatek Microelectronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Taiwan Speciality and Novatek Microelectronics

The main advantage of trading using opposite Taiwan Speciality and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Speciality position performs unexpectedly, Novatek Microelectronics 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 Novatek Microelectronics will offset losses from the drop in Novatek Microelectronics' long position.
The idea behind Taiwan Speciality Chemicals and Novatek Microelectronics 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.
Check out your portfolio center.
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

Other Complementary Tools

Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Stock Screener
Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Sign In To Macroaxis
Sign in to explore Macroaxis' wealth optimization platform and fintech modules
Fundamental Analysis
View fundamental data based on most recent published financial statements