Correlation Between Shenzhen Zhongzhuang and Yuanjie Semiconductor

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

By analyzing existing cross correlation between Shenzhen Zhongzhuang Construction and Yuanjie Semiconductor Technology, you can compare the effects of market volatilities on Shenzhen Zhongzhuang and Yuanjie 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 Shenzhen Zhongzhuang with a short position of Yuanjie Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Zhongzhuang and Yuanjie Semiconductor.

Diversification Opportunities for Shenzhen Zhongzhuang and Yuanjie Semiconductor

-0.17

Correlation Coefficient

Shenzhen Zhongzhuang  Yuanjie Semiconductor

Good diversification

The 3 months correlation between Shenzhen and Yuanjie is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct and Yuanjie Semiconductor Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanjie Semiconductor and Shenzhen Zhongzhuang 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 Shenzhen Zhongzhuang Construction are associated (or correlated) with Yuanjie Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanjie Semiconductor has no effect on the direction of Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and Yuanjie Semiconductor go up and down completely randomly.

Pair Corralation between Shenzhen Zhongzhuang and Yuanjie Semiconductor

Assuming the 90 days trading horizon Shenzhen Zhongzhuang is expected to generate 12.13 times less return on investment than Yuanjie Semiconductor. But when comparing it to its historical volatility, Shenzhen Zhongzhuang Construction is 1.32 times less risky than Yuanjie Semiconductor. It trades about 0.0 of its potential returns per unit of risk. Yuanjie Semiconductor Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  15,089  in Yuanjie Semiconductor Technology on October 7, 2024 and sell it today you would lose (2,291) from holding Yuanjie Semiconductor Technology or give up 15.18% of portfolio value over 90 days.

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

Shenzhen Zhongzhuang Construct  vs.  Yuanjie Semiconductor Technolo

Shenzhen Zhongzhuang

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhongzhuang Construction are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Zhongzhuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Yuanjie Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yuanjie Semiconductor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shenzhen Zhongzhuang and Yuanjie Semiconductor

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

The idea behind Shenzhen Zhongzhuang Construction and Yuanjie 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.