Correlation Between Shannon Semiconductor and Dalian Thermal

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

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

Diversification Opportunities for Shannon Semiconductor and Dalian Thermal

-0.11

Correlation Coefficient

Shannon Semiconductor  Dalian Thermal

Good diversification

The 3 months correlation between Shannon and Dalian is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Shannon Semiconductor Technolo and Dalian Thermal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalian Thermal Power and Shannon 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 Shannon Semiconductor Technology are associated (or correlated) with Dalian Thermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalian Thermal Power has no effect on the direction of Shannon Semiconductor i.e., Shannon Semiconductor and Dalian Thermal go up and down completely randomly.

Pair Corralation between Shannon Semiconductor and Dalian Thermal

Assuming the 90 days trading horizon Shannon Semiconductor Technology is expected to generate 1.65 times more return on investment than Dalian Thermal. However, Shannon Semiconductor is 1.65 times more volatile than Dalian Thermal Power. It trades about 0.13 of its potential returns per unit of risk. Dalian Thermal Power is currently generating about 0.02 per unit of risk. If you would invest  2,925  in Shannon Semiconductor Technology on December 25, 2024 and sell it today you would earn a total of  858.00  from holding Shannon Semiconductor Technology or generate 29.33% return on investment over 90 days.

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

Shannon Semiconductor Technolo  vs.  Dalian Thermal Power

Shannon Semiconductor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shannon Semiconductor Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shannon Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Dalian Thermal Power

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Thermal Power are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dalian Thermal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shannon Semiconductor and Dalian Thermal

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

The idea behind Shannon Semiconductor Technology and Dalian Thermal Power 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..