Correlation Between Chengdu Xinzhu and GigaDevice SemiconductorBei

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

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

Diversification Opportunities for Chengdu Xinzhu and GigaDevice SemiconductorBei

0.35

Correlation Coefficient

Chengdu Xinzhu  GigaDevice SemiconductorBei

Weak diversification

The 3 months correlation between Chengdu and GigaDevice is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Xinzhu RoadBridge and GigaDevice SemiconductorBeiji in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaDevice SemiconductorBei and Chengdu Xinzhu 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 Chengdu Xinzhu RoadBridge 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 Chengdu Xinzhu i.e., Chengdu Xinzhu and GigaDevice SemiconductorBei go up and down completely randomly.

Pair Corralation between Chengdu Xinzhu and GigaDevice SemiconductorBei

Assuming the 90 days trading horizon Chengdu Xinzhu RoadBridge is expected to generate 0.95 times more return on investment than GigaDevice SemiconductorBei. However, Chengdu Xinzhu RoadBridge is 1.05 times less risky than GigaDevice SemiconductorBei. It trades about 0.02 of its potential returns per unit of risk. GigaDevice SemiconductorBeiji is currently generating about 0.01 per unit of risk. If you would invest  523.00  in Chengdu Xinzhu RoadBridge on October 15, 2024 and sell it today you would earn a total of  14.00  from holding Chengdu Xinzhu RoadBridge or generate 2.68% return on investment over 90 days.

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

Chengdu Xinzhu RoadBridge  vs.  GigaDevice SemiconductorBeiji

Chengdu Xinzhu RoadBridge

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Xinzhu RoadBridge are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu Xinzhu sustained solid returns over the last few months and may actually be approaching a breakup point.

GigaDevice SemiconductorBei

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaDevice SemiconductorBeiji are ranked lower than 13 (%) 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 Chengdu Xinzhu and GigaDevice SemiconductorBei

The main advantage of trading using opposite Chengdu Xinzhu and GigaDevice SemiconductorBei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chengdu Xinzhu 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 Chengdu Xinzhu RoadBridge 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.