Correlation Between Shenyang Chemical and Advanced Micro

Can any of the company-specific risk be diversified away by investing in both Shenyang Chemical and Advanced Micro 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 Shenyang Chemical and Advanced Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenyang Chemical Industry and Advanced Micro Fabrication, you can compare the effects of market volatilities on Shenyang Chemical and Advanced Micro 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 Shenyang Chemical with a short position of Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenyang Chemical and Advanced Micro.

Diversification Opportunities for Shenyang Chemical and Advanced Micro

0.6

Correlation Coefficient

Shenyang Chemical  Advanced Micro

Poor diversification

The 3 months correlation between Shenyang and Advanced is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Chemical Industry and Advanced Micro Fabrication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Fabri and Shenyang Chemical 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 Shenyang Chemical Industry are associated (or correlated) with Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Fabri has no effect on the direction of Shenyang Chemical i.e., Shenyang Chemical and Advanced Micro go up and down completely randomly.

Pair Corralation between Shenyang Chemical and Advanced Micro

Assuming the 90 days trading horizon Shenyang Chemical Industry is expected to under-perform the Advanced Micro. But the stock apears to be less risky and, when comparing its historical volatility, Shenyang Chemical Industry is 1.18 times less risky than Advanced Micro. The stock trades about -0.01 of its potential returns per unit of risk. The Advanced Micro Fabrication is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  13,866  in Advanced Micro Fabrication on October 9, 2024 and sell it today you would earn a total of  4,305  from holding Advanced Micro Fabrication or generate 31.05% return on investment over 90 days.

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

Shenyang Chemical Industry  vs.  Advanced Micro Fabrication

Shenyang Chemical

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Chemical Industry are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Advanced Micro Fabri

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shenyang Chemical and Advanced Micro

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

The idea behind Shenyang Chemical Industry and Advanced Micro Fabrication 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.