Correlation Between Hsin Kuang and Realtek Semiconductor

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

By analyzing existing cross correlation between Hsin Kuang Steel and Realtek Semiconductor Corp, you can compare the effects of market volatilities on Hsin Kuang and Realtek 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 Hsin Kuang with a short position of Realtek Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsin Kuang and Realtek Semiconductor.

Diversification Opportunities for Hsin Kuang and Realtek Semiconductor

-0.61

Correlation Coefficient

Hsin Kuang  Realtek Semiconductor

Excellent diversification

The 3 months correlation between Hsin and Realtek is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hsin Kuang Steel and Realtek Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realtek Semiconductor and Hsin Kuang 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 Hsin Kuang Steel are associated (or correlated) with Realtek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realtek Semiconductor has no effect on the direction of Hsin Kuang i.e., Hsin Kuang and Realtek Semiconductor go up and down completely randomly.

Pair Corralation between Hsin Kuang and Realtek Semiconductor

Assuming the 90 days trading horizon Hsin Kuang Steel is expected to under-perform the Realtek Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Hsin Kuang Steel is 1.23 times less risky than Realtek Semiconductor. The stock trades about -0.16 of its potential returns per unit of risk. The Realtek Semiconductor Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  50,600  in Realtek Semiconductor Corp on September 13, 2024 and sell it today you would earn a total of  1,900  from holding Realtek Semiconductor Corp or generate 3.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Hsin Kuang Steel  vs.  Realtek Semiconductor Corp

Hsin Kuang Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hsin Kuang Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Realtek Semiconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Realtek Semiconductor Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Realtek Semiconductor is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hsin Kuang and Realtek Semiconductor

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

The idea behind Hsin Kuang Steel and Realtek Semiconductor Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.