Correlation Between Microelectronics and DingZing Advanced

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

By analyzing existing cross correlation between Microelectronics Technology and DingZing Advanced Materials, you can compare the effects of market volatilities on Microelectronics and DingZing Advanced 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 Microelectronics with a short position of DingZing Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microelectronics and DingZing Advanced.

Diversification Opportunities for Microelectronics and DingZing Advanced

0.51

Correlation Coefficient

Microelectronics  DingZing Advanced

Very weak diversification

The 3 months correlation between Microelectronics and DingZing is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Microelectronics Technology and DingZing Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DingZing Advanced and Microelectronics 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 Microelectronics Technology are associated (or correlated) with DingZing Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DingZing Advanced has no effect on the direction of Microelectronics i.e., Microelectronics and DingZing Advanced go up and down completely randomly.

Pair Corralation between Microelectronics and DingZing Advanced

Assuming the 90 days trading horizon Microelectronics Technology is expected to generate 1.41 times more return on investment than DingZing Advanced. However, Microelectronics is 1.41 times more volatile than DingZing Advanced Materials. It trades about 0.1 of its potential returns per unit of risk. DingZing Advanced Materials is currently generating about 0.05 per unit of risk. If you would invest  2,990  in Microelectronics Technology on October 25, 2024 and sell it today you would earn a total of  585.00  from holding Microelectronics Technology or generate 19.57% return on investment over 90 days.

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

Microelectronics Technology  vs.  DingZing Advanced Materials

Microelectronics Tec

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microelectronics Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Microelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

DingZing Advanced

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DingZing Advanced Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, DingZing Advanced may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Microelectronics and DingZing Advanced

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

The idea behind Microelectronics Technology and DingZing Advanced Materials 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.