Correlation Between Tianjin Jingwei and Southchip Semiconductor

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

By analyzing existing cross correlation between Tianjin Jingwei Electric and Southchip Semiconductor Technology, you can compare the effects of market volatilities on Tianjin Jingwei and Southchip 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 Tianjin Jingwei with a short position of Southchip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Jingwei and Southchip Semiconductor.

Diversification Opportunities for Tianjin Jingwei and Southchip Semiconductor

0.87

Correlation Coefficient

Tianjin Jingwei  Southchip Semiconductor

Very poor diversification

The 3 months correlation between Tianjin and Southchip is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Jingwei Electric and Southchip Semiconductor Techno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southchip Semiconductor and Tianjin Jingwei 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 Tianjin Jingwei Electric are associated (or correlated) with Southchip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southchip Semiconductor has no effect on the direction of Tianjin Jingwei i.e., Tianjin Jingwei and Southchip Semiconductor go up and down completely randomly.

Pair Corralation between Tianjin Jingwei and Southchip Semiconductor

Assuming the 90 days trading horizon Tianjin Jingwei Electric is expected to under-perform the Southchip Semiconductor. In addition to that, Tianjin Jingwei is 1.06 times more volatile than Southchip Semiconductor Technology. It trades about -0.05 of its total potential returns per unit of risk. Southchip Semiconductor Technology is currently generating about -0.02 per unit of volatility. If you would invest  3,918  in Southchip Semiconductor Technology on December 25, 2024 and sell it today you would lose (179.00) from holding Southchip Semiconductor Technology or give up 4.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Tianjin Jingwei Electric  vs.  Southchip Semiconductor Techno

Tianjin Jingwei Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tianjin Jingwei Electric 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.

Southchip Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southchip Semiconductor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Southchip Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tianjin Jingwei and Southchip Semiconductor

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

The idea behind Tianjin Jingwei Electric and Southchip Semiconductor Technology 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.