Correlation Between Elite Semiconductor and Orient Semiconductor

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

By analyzing existing cross correlation between Elite Semiconductor Memory and Orient Semiconductor Electronics, you can compare the effects of market volatilities on Elite Semiconductor and Orient 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 Elite Semiconductor with a short position of Orient Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Semiconductor and Orient Semiconductor.

Diversification Opportunities for Elite Semiconductor and Orient Semiconductor

0.92

Correlation Coefficient

Elite Semiconductor  Orient Semiconductor

Almost no diversification

The 3 months correlation between Elite and Orient is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Elite Semiconductor Memory and Orient Semiconductor Electroni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Semiconductor and Elite 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 Elite Semiconductor Memory are associated (or correlated) with Orient Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Semiconductor has no effect on the direction of Elite Semiconductor i.e., Elite Semiconductor and Orient Semiconductor go up and down completely randomly.

Pair Corralation between Elite Semiconductor and Orient Semiconductor

Assuming the 90 days trading horizon Elite Semiconductor Memory is expected to under-perform the Orient Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Elite Semiconductor Memory is 1.05 times less risky than Orient Semiconductor. The stock trades about 0.0 of its potential returns per unit of risk. The Orient Semiconductor Electronics is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,480  in Orient Semiconductor Electronics on December 29, 2024 and sell it today you would lose (45.00) from holding Orient Semiconductor Electronics or give up 1.29% of portfolio value over 90 days.

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

Elite Semiconductor Memory  vs.  Orient Semiconductor Electroni

Elite Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elite Semiconductor Memory has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Elite Semiconductor is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Orient Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orient Semiconductor Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Orient Semiconductor is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Elite Semiconductor and Orient Semiconductor

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

The idea behind Elite Semiconductor Memory and Orient Semiconductor Electronics 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.