Correlation Between Sichuan Tianqi and Thinkon Semiconductor

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

By analyzing existing cross correlation between Sichuan Tianqi Lithium and Thinkon Semiconductor Jinzhou, you can compare the effects of market volatilities on Sichuan Tianqi and Thinkon 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 Sichuan Tianqi with a short position of Thinkon Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Tianqi and Thinkon Semiconductor.

Diversification Opportunities for Sichuan Tianqi and Thinkon Semiconductor

0.87

Correlation Coefficient

Sichuan Tianqi  Thinkon Semiconductor

Very poor diversification

The 3 months correlation between Sichuan and Thinkon is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Tianqi Lithium and Thinkon Semiconductor Jinzhou in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thinkon Semiconductor and Sichuan Tianqi 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 Sichuan Tianqi Lithium are associated (or correlated) with Thinkon Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thinkon Semiconductor has no effect on the direction of Sichuan Tianqi i.e., Sichuan Tianqi and Thinkon Semiconductor go up and down completely randomly.

Pair Corralation between Sichuan Tianqi and Thinkon Semiconductor

Assuming the 90 days trading horizon Sichuan Tianqi Lithium is expected to under-perform the Thinkon Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Sichuan Tianqi Lithium is 1.17 times less risky than Thinkon Semiconductor. The stock trades about -0.06 of its potential returns per unit of risk. The Thinkon Semiconductor Jinzhou is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,430  in Thinkon Semiconductor Jinzhou on October 3, 2024 and sell it today you would lose (85.00) from holding Thinkon Semiconductor Jinzhou or give up 3.5% of portfolio value over 90 days.

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

Sichuan Tianqi Lithium  vs.  Thinkon Semiconductor Jinzhou

Sichuan Tianqi Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sichuan Tianqi Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Thinkon Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thinkon Semiconductor Jinzhou has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Thinkon 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 Sichuan Tianqi and Thinkon Semiconductor

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

The idea behind Sichuan Tianqi Lithium and Thinkon Semiconductor Jinzhou 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.