Correlation Between Vanguard International and Chipbond Technology

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

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

Diversification Opportunities for Vanguard International and Chipbond Technology

0.65

Correlation Coefficient

Vanguard International  Chipbond Technology

Poor diversification

The 3 months correlation between Vanguard and Chipbond is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International Semicon and Chipbond Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chipbond Technology and Vanguard International 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 Vanguard International Semiconductor are associated (or correlated) with Chipbond Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chipbond Technology has no effect on the direction of Vanguard International i.e., Vanguard International and Chipbond Technology go up and down completely randomly.

Pair Corralation between Vanguard International and Chipbond Technology

Assuming the 90 days trading horizon Vanguard International Semiconductor is expected to generate 1.74 times more return on investment than Chipbond Technology. However, Vanguard International is 1.74 times more volatile than Chipbond Technology. It trades about 0.15 of its potential returns per unit of risk. Chipbond Technology is currently generating about 0.03 per unit of risk. If you would invest  9,110  in Vanguard International Semiconductor on September 19, 2024 and sell it today you would earn a total of  590.00  from holding Vanguard International Semiconductor or generate 6.48% return on investment over 90 days.

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

Vanguard International Semicon  vs.  Chipbond Technology

Vanguard International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard International Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Chipbond Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chipbond Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chipbond Technology 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 Vanguard International and Chipbond Technology

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

The idea behind Vanguard International Semiconductor and Chipbond 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.

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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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.