Correlation Between HengFeng Information and GigaDevice SemiconductorBei

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

By analyzing existing cross correlation between HengFeng Information Technology and GigaDevice SemiconductorBeiji, you can compare the effects of market volatilities on HengFeng Information and GigaDevice SemiconductorBei 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 HengFeng Information with a short position of GigaDevice SemiconductorBei. Check out your portfolio center. Please also check ongoing floating volatility patterns of HengFeng Information and GigaDevice SemiconductorBei.

Diversification Opportunities for HengFeng Information and GigaDevice SemiconductorBei

-0.13

Correlation Coefficient

HengFeng Information  GigaDevice SemiconductorBei

Good diversification

The 3 months correlation between HengFeng and GigaDevice is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding HengFeng Information Technolog and GigaDevice SemiconductorBeiji in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaDevice SemiconductorBei and HengFeng Information 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 HengFeng Information Technology are associated (or correlated) with GigaDevice SemiconductorBei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaDevice SemiconductorBei has no effect on the direction of HengFeng Information i.e., HengFeng Information and GigaDevice SemiconductorBei go up and down completely randomly.

Pair Corralation between HengFeng Information and GigaDevice SemiconductorBei

Assuming the 90 days trading horizon HengFeng Information is expected to generate 15.51 times less return on investment than GigaDevice SemiconductorBei. But when comparing it to its historical volatility, HengFeng Information Technology is 1.29 times less risky than GigaDevice SemiconductorBei. It trades about 0.02 of its potential returns per unit of risk. GigaDevice SemiconductorBeiji is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  8,508  in GigaDevice SemiconductorBeiji on December 5, 2024 and sell it today you would earn a total of  4,942  from holding GigaDevice SemiconductorBeiji or generate 58.09% return on investment over 90 days.

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

HengFeng Information Technolog  vs.  GigaDevice SemiconductorBeiji

HengFeng Information

Risk-Adjusted Performance

Weak

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

GigaDevice SemiconductorBei

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaDevice SemiconductorBeiji are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GigaDevice SemiconductorBei sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HengFeng Information and GigaDevice SemiconductorBei

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

The idea behind HengFeng Information Technology and GigaDevice SemiconductorBeiji 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.