Correlation Between East Money and Semiconductor Manufacturing

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

By analyzing existing cross correlation between East Money Information and Semiconductor Manufacturing Intl, you can compare the effects of market volatilities on East Money and Semiconductor Manufacturing 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 East Money with a short position of Semiconductor Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Money and Semiconductor Manufacturing.

Diversification Opportunities for East Money and Semiconductor Manufacturing

0.07

Correlation Coefficient

East Money  Semiconductor Manufacturing

Significant diversification

The 3 months correlation between East and Semiconductor is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding East Money Information and Semiconductor Manufacturing In in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Manufacturing and East Money 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 East Money Information are associated (or correlated) with Semiconductor Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semiconductor Manufacturing has no effect on the direction of East Money i.e., East Money and Semiconductor Manufacturing go up and down completely randomly.

Pair Corralation between East Money and Semiconductor Manufacturing

Assuming the 90 days trading horizon East Money is expected to generate 2.32 times less return on investment than Semiconductor Manufacturing. In addition to that, East Money is 1.01 times more volatile than Semiconductor Manufacturing Intl. It trades about 0.03 of its total potential returns per unit of risk. Semiconductor Manufacturing Intl is currently generating about 0.07 per unit of volatility. If you would invest  4,342  in Semiconductor Manufacturing Intl on October 24, 2024 and sell it today you would earn a total of  5,842  from holding Semiconductor Manufacturing Intl or generate 134.55% return on investment over 90 days.

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

East Money Information  vs.  Semiconductor Manufacturing In

East Money Information

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in East Money Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, East Money may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Semiconductor Manufacturing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing Intl are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Semiconductor Manufacturing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with East Money and Semiconductor Manufacturing

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

The idea behind East Money Information and Semiconductor Manufacturing Intl 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.