Correlation Between Cloud Air and ITM Semiconductor

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

By analyzing existing cross correlation between Cloud Air CoLtd and ITM Semiconductor Co, you can compare the effects of market volatilities on Cloud Air and ITM 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 Cloud Air with a short position of ITM Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cloud Air and ITM Semiconductor.

Diversification Opportunities for Cloud Air and ITM Semiconductor

0.1

Correlation Coefficient

Cloud Air  ITM Semiconductor

Average diversification

The 3 months correlation between Cloud and ITM is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Cloud Air CoLtd and ITM Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Semiconductor and Cloud Air 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 Cloud Air CoLtd are associated (or correlated) with ITM Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Semiconductor has no effect on the direction of Cloud Air i.e., Cloud Air and ITM Semiconductor go up and down completely randomly.

Pair Corralation between Cloud Air and ITM Semiconductor

Assuming the 90 days trading horizon Cloud Air CoLtd is expected to generate 0.74 times more return on investment than ITM Semiconductor. However, Cloud Air CoLtd is 1.34 times less risky than ITM Semiconductor. It trades about 0.05 of its potential returns per unit of risk. ITM Semiconductor Co is currently generating about -0.05 per unit of risk. If you would invest  88,800  in Cloud Air CoLtd on December 30, 2024 and sell it today you would earn a total of  3,800  from holding Cloud Air CoLtd or generate 4.28% return on investment over 90 days.

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

Cloud Air CoLtd  vs.  ITM Semiconductor Co

Cloud Air CoLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cloud Air CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cloud Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ITM Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITM Semiconductor Co 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 Cloud Air and ITM Semiconductor

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

The idea behind Cloud Air CoLtd and ITM Semiconductor Co 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.