Correlation Between Hubei Xingfa and Southchip Semiconductor

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

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

Diversification Opportunities for Hubei Xingfa and Southchip Semiconductor

0.06

Correlation Coefficient

Hubei Xingfa  Southchip Semiconductor

Significant diversification

The 3 months correlation between Hubei and Southchip is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Xingfa Chemicals and Southchip Semiconductor Techno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southchip Semiconductor and Hubei Xingfa 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 Hubei Xingfa Chemicals are associated (or correlated) with Southchip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southchip Semiconductor has no effect on the direction of Hubei Xingfa i.e., Hubei Xingfa and Southchip Semiconductor go up and down completely randomly.

Pair Corralation between Hubei Xingfa and Southchip Semiconductor

Assuming the 90 days trading horizon Hubei Xingfa Chemicals is expected to generate 0.43 times more return on investment than Southchip Semiconductor. However, Hubei Xingfa Chemicals is 2.32 times less risky than Southchip Semiconductor. It trades about -0.29 of its potential returns per unit of risk. Southchip Semiconductor Technology is currently generating about -0.3 per unit of risk. If you would invest  2,289  in Hubei Xingfa Chemicals on October 8, 2024 and sell it today you would lose (151.00) from holding Hubei Xingfa Chemicals or give up 6.6% of portfolio value over 90 days.

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

Hubei Xingfa Chemicals  vs.  Southchip Semiconductor Techno

Hubei Xingfa Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hubei Xingfa Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Southchip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southchip Semiconductor Technology 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 Hubei Xingfa and Southchip Semiconductor

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

The idea behind Hubei Xingfa Chemicals and Southchip Semiconductor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.