Correlation Between Elite Semiconductor and Sinopower Semiconductor

Can any of the company-specific risk be diversified away by investing in both Elite Semiconductor and Sinopower 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 Sinopower 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 Sinopower Semiconductor, you can compare the effects of market volatilities on Elite Semiconductor and Sinopower 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 Sinopower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Semiconductor and Sinopower Semiconductor.

Diversification Opportunities for Elite Semiconductor and Sinopower Semiconductor

0.68

Correlation Coefficient

Elite Semiconductor  Sinopower Semiconductor

Poor diversification

The 3 months correlation between Elite and Sinopower is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Elite Semiconductor Memory and Sinopower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopower 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 Sinopower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopower Semiconductor has no effect on the direction of Elite Semiconductor i.e., Elite Semiconductor and Sinopower Semiconductor go up and down completely randomly.

Pair Corralation between Elite Semiconductor and Sinopower Semiconductor

Assuming the 90 days trading horizon Elite Semiconductor is expected to generate 4.43 times less return on investment than Sinopower Semiconductor. But when comparing it to its historical volatility, Elite Semiconductor Memory is 1.04 times less risky than Sinopower Semiconductor. It trades about 0.04 of its potential returns per unit of risk. Sinopower Semiconductor is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  9,430  in Sinopower Semiconductor on December 4, 2024 and sell it today you would earn a total of  1,720  from holding Sinopower Semiconductor or generate 18.24% return on investment over 90 days.

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

Elite Semiconductor Memory  vs.  Sinopower Semiconductor

Elite Semiconductor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Semiconductor Memory are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Sinopower Semiconductor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopower Semiconductor are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sinopower Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elite Semiconductor and Sinopower Semiconductor

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

The idea behind Elite Semiconductor Memory and Sinopower Semiconductor 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.