Correlation Between Beijing Kaiwen and Southchip Semiconductor

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Can any of the company-specific risk be diversified away by investing in both Beijing Kaiwen and Southchip 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 Beijing Kaiwen and Southchip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beijing Kaiwen Education and Southchip Semiconductor Technology, you can compare the effects of market volatilities on Beijing Kaiwen and Southchip 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 Beijing Kaiwen with a short position of Southchip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Kaiwen and Southchip Semiconductor.

Diversification Opportunities for Beijing Kaiwen and Southchip Semiconductor

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Beijing and Southchip is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Kaiwen Education and Southchip Semiconductor Techno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southchip Semiconductor and Beijing Kaiwen 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 Beijing Kaiwen Education are associated (or correlated) with Southchip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southchip Semiconductor has no effect on the direction of Beijing Kaiwen i.e., Beijing Kaiwen and Southchip Semiconductor go up and down completely randomly.

Pair Corralation between Beijing Kaiwen and Southchip Semiconductor

Assuming the 90 days trading horizon Beijing Kaiwen Education is expected to generate 0.93 times more return on investment than Southchip Semiconductor. However, Beijing Kaiwen Education is 1.07 times less risky than Southchip Semiconductor. It trades about 0.01 of its potential returns per unit of risk. Southchip Semiconductor Technology is currently generating about -0.02 per unit of risk. If you would invest  485.00  in Beijing Kaiwen Education on October 10, 2024 and sell it today you would lose (51.00) from holding Beijing Kaiwen Education or give up 10.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy89.5%
ValuesDaily Returns

Beijing Kaiwen Education  vs.  Southchip Semiconductor Techno

 Performance 
       Timeline  
Beijing Kaiwen Education 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Southchip Semiconductor Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Southchip Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Beijing Kaiwen and Southchip Semiconductor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Beijing Kaiwen and Southchip Semiconductor

The main advantage of trading using opposite Beijing Kaiwen and Southchip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Kaiwen position performs unexpectedly, Southchip 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 Southchip Semiconductor will offset losses from the drop in Southchip Semiconductor's long position.
The idea behind Beijing Kaiwen Education and Southchip Semiconductor Technology 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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