Correlation Between Shengda Mining and Will Semiconductor

Can any of the company-specific risk be diversified away by investing in both Shengda Mining and Will Semiconductor 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 Shengda Mining and Will Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shengda Mining Co and Will Semiconductor Co, you can compare the effects of market volatilities on Shengda Mining and Will Semiconductor 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 Shengda Mining with a short position of Will Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shengda Mining and Will Semiconductor.

Diversification Opportunities for Shengda Mining and Will Semiconductor

0.56

Correlation Coefficient

Shengda Mining  Will Semiconductor

Very weak diversification

The 3 months correlation between Shengda and Will is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Shengda Mining Co and Will Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Will Semiconductor and Shengda Mining 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 Shengda Mining Co are associated (or correlated) with Will Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Will Semiconductor has no effect on the direction of Shengda Mining i.e., Shengda Mining and Will Semiconductor go up and down completely randomly.

Pair Corralation between Shengda Mining and Will Semiconductor

Assuming the 90 days trading horizon Shengda Mining Co is expected to generate 0.89 times more return on investment than Will Semiconductor. However, Shengda Mining Co is 1.12 times less risky than Will Semiconductor. It trades about 0.23 of its potential returns per unit of risk. Will Semiconductor Co is currently generating about 0.11 per unit of risk. If you would invest  1,244  in Shengda Mining Co on October 25, 2024 and sell it today you would earn a total of  128.00  from holding Shengda Mining Co or generate 10.29% return on investment over 90 days.

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

Shengda Mining Co  vs.  Will Semiconductor Co

Shengda Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shengda Mining Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shengda Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Will Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Will Semiconductor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Will Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shengda Mining and Will Semiconductor

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

The idea behind Shengda Mining Co and Will Semiconductor Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.