Correlation Between China Merchants and Giantec Semiconductor

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

By analyzing existing cross correlation between China Merchants Bank and Giantec Semiconductor Corp, you can compare the effects of market volatilities on China Merchants and Giantec 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 China Merchants with a short position of Giantec Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Giantec Semiconductor.

Diversification Opportunities for China Merchants and Giantec Semiconductor

0.69

Correlation Coefficient

China Merchants  Giantec Semiconductor

Poor diversification

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

Pair Corralation between China Merchants and Giantec Semiconductor

Assuming the 90 days trading horizon China Merchants is expected to generate 1.03 times less return on investment than Giantec Semiconductor. But when comparing it to its historical volatility, China Merchants Bank is 2.93 times less risky than Giantec Semiconductor. It trades about 0.03 of its potential returns per unit of risk. Giantec Semiconductor Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,881  in Giantec Semiconductor Corp on October 5, 2024 and sell it today you would lose (1,272) from holding Giantec Semiconductor Corp or give up 18.49% of portfolio value over 90 days.

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

China Merchants Bank  vs.  Giantec Semiconductor Corp

China Merchants Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Merchants Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Merchants is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Giantec Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Giantec Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Merchants and Giantec Semiconductor

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

The idea behind China Merchants Bank and Giantec Semiconductor Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.