Correlation Between Shanghai Commercial and Powerchip Semiconductor

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

By analyzing existing cross correlation between Shanghai Commercial Savings and Powerchip Semiconductor Manufacturing, you can compare the effects of market volatilities on Shanghai Commercial and Powerchip 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 Shanghai Commercial with a short position of Powerchip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Commercial and Powerchip Semiconductor.

Diversification Opportunities for Shanghai Commercial and Powerchip Semiconductor

0.69

Correlation Coefficient

Shanghai Commercial  Powerchip Semiconductor

Poor diversification

The 3 months correlation between Shanghai and Powerchip is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Commercial Savings and Powerchip Semiconductor Manufa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powerchip Semiconductor and Shanghai Commercial 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 Shanghai Commercial Savings are associated (or correlated) with Powerchip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powerchip Semiconductor has no effect on the direction of Shanghai Commercial i.e., Shanghai Commercial and Powerchip Semiconductor go up and down completely randomly.

Pair Corralation between Shanghai Commercial and Powerchip Semiconductor

Assuming the 90 days trading horizon Shanghai Commercial Savings is expected to generate 0.28 times more return on investment than Powerchip Semiconductor. However, Shanghai Commercial Savings is 3.53 times less risky than Powerchip Semiconductor. It trades about 0.23 of its potential returns per unit of risk. Powerchip Semiconductor Manufacturing is currently generating about 0.03 per unit of risk. If you would invest  3,980  in Shanghai Commercial Savings on December 30, 2024 and sell it today you would earn a total of  555.00  from holding Shanghai Commercial Savings or generate 13.94% return on investment over 90 days.

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

Shanghai Commercial Savings  vs.  Powerchip Semiconductor Manufa

Shanghai Commercial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Commercial Savings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shanghai Commercial showed solid returns over the last few months and may actually be approaching a breakup point.

Powerchip Semiconductor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Powerchip Semiconductor Manufacturing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Powerchip Semiconductor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shanghai Commercial and Powerchip Semiconductor

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

The idea behind Shanghai Commercial Savings and Powerchip Semiconductor Manufacturing 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.