Correlation Between Realtek Semiconductor and Hsin Kuang

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

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

Diversification Opportunities for Realtek Semiconductor and Hsin Kuang

0.44

Correlation Coefficient

Realtek Semiconductor  Hsin Kuang

Very weak diversification

The 3 months correlation between Realtek and Hsin is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Realtek Semiconductor Corp and Hsin Kuang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Kuang Steel and Realtek Semiconductor 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 Realtek Semiconductor Corp are associated (or correlated) with Hsin Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Kuang Steel has no effect on the direction of Realtek Semiconductor i.e., Realtek Semiconductor and Hsin Kuang go up and down completely randomly.

Pair Corralation between Realtek Semiconductor and Hsin Kuang

Assuming the 90 days trading horizon Realtek Semiconductor is expected to generate 2.18 times less return on investment than Hsin Kuang. But when comparing it to its historical volatility, Realtek Semiconductor Corp is 1.1 times less risky than Hsin Kuang. It trades about 0.06 of its potential returns per unit of risk. Hsin Kuang Steel is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,555  in Hsin Kuang Steel on December 24, 2024 and sell it today you would earn a total of  585.00  from holding Hsin Kuang Steel or generate 12.84% return on investment over 90 days.

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

Realtek Semiconductor Corp  vs.  Hsin Kuang Steel

Realtek Semiconductor

Risk-Adjusted Performance

Insignificant

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

Hsin Kuang Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hsin Kuang Steel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hsin Kuang showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Realtek Semiconductor and Hsin Kuang

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

The idea behind Realtek Semiconductor Corp and Hsin Kuang Steel 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.