Correlation Between ZJBC Information and GigaDevice SemiconductorBei

Can any of the company-specific risk be diversified away by investing in both ZJBC Information and GigaDevice SemiconductorBei 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 ZJBC Information and GigaDevice SemiconductorBei into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZJBC Information Technology and GigaDevice SemiconductorBeiji, you can compare the effects of market volatilities on ZJBC Information and GigaDevice SemiconductorBei 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 ZJBC Information with a short position of GigaDevice SemiconductorBei. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZJBC Information and GigaDevice SemiconductorBei.

Diversification Opportunities for ZJBC Information and GigaDevice SemiconductorBei

0.57

Correlation Coefficient

ZJBC Information  GigaDevice SemiconductorBei

Very weak diversification

The 3 months correlation between ZJBC and GigaDevice is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding ZJBC Information Technology and GigaDevice SemiconductorBeiji in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaDevice SemiconductorBei and ZJBC Information 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 ZJBC Information Technology are associated (or correlated) with GigaDevice SemiconductorBei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaDevice SemiconductorBei has no effect on the direction of ZJBC Information i.e., ZJBC Information and GigaDevice SemiconductorBei go up and down completely randomly.

Pair Corralation between ZJBC Information and GigaDevice SemiconductorBei

Assuming the 90 days trading horizon ZJBC Information is expected to generate 2.66 times less return on investment than GigaDevice SemiconductorBei. But when comparing it to its historical volatility, ZJBC Information Technology is 1.06 times less risky than GigaDevice SemiconductorBei. It trades about 0.14 of its potential returns per unit of risk. GigaDevice SemiconductorBeiji is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  8,322  in GigaDevice SemiconductorBeiji on September 27, 2024 and sell it today you would earn a total of  2,654  from holding GigaDevice SemiconductorBeiji or generate 31.89% return on investment over 90 days.

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

ZJBC Information Technology  vs.  GigaDevice SemiconductorBeiji

ZJBC Information Tec

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ZJBC Information Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZJBC Information sustained solid returns over the last few months and may actually be approaching a breakup point.

GigaDevice SemiconductorBei

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaDevice SemiconductorBeiji are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GigaDevice SemiconductorBei sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZJBC Information and GigaDevice SemiconductorBei

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

The idea behind ZJBC Information Technology and GigaDevice SemiconductorBeiji 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.