Correlation Between City Development and Nexchip Semiconductor

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

By analyzing existing cross correlation between City Development Environment and Nexchip Semiconductor Corp, you can compare the effects of market volatilities on City Development and Nexchip 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 City Development with a short position of Nexchip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Development and Nexchip Semiconductor.

Diversification Opportunities for City Development and Nexchip Semiconductor

0.7

Correlation Coefficient

City Development  Nexchip Semiconductor

Poor diversification

The 3 months correlation between City and Nexchip is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding City Development Environment and Nexchip Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexchip Semiconductor and City Development 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 City Development Environment are associated (or correlated) with Nexchip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexchip Semiconductor has no effect on the direction of City Development i.e., City Development and Nexchip Semiconductor go up and down completely randomly.

Pair Corralation between City Development and Nexchip Semiconductor

Assuming the 90 days trading horizon City Development Environment is expected to generate 0.54 times more return on investment than Nexchip Semiconductor. However, City Development Environment is 1.85 times less risky than Nexchip Semiconductor. It trades about -0.38 of its potential returns per unit of risk. Nexchip Semiconductor Corp is currently generating about -0.33 per unit of risk. If you would invest  1,375  in City Development Environment on October 12, 2024 and sell it today you would lose (141.00) from holding City Development Environment or give up 10.25% of portfolio value over 90 days.

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

City Development Environment  vs.  Nexchip Semiconductor Corp

City Development Env

Risk-Adjusted Performance

0 of 100

Weak

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

Nexchip Semiconductor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nexchip Semiconductor Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nexchip Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with City Development and Nexchip Semiconductor

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

The idea behind City Development Environment and Nexchip Semiconductor 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.