Correlation Between Xinke Material and Will Semiconductor

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

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

Diversification Opportunities for Xinke Material and Will Semiconductor

0.51

Correlation Coefficient

Xinke Material  Will Semiconductor

Very weak diversification

The 3 months correlation between Xinke and Will is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Xinke Material and Will Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Will Semiconductor and Xinke Material 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 Xinke Material are associated (or correlated) with Will Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Will Semiconductor has no effect on the direction of Xinke Material i.e., Xinke Material and Will Semiconductor go up and down completely randomly.

Pair Corralation between Xinke Material and Will Semiconductor

Assuming the 90 days trading horizon Xinke Material is expected to generate 14.19 times less return on investment than Will Semiconductor. In addition to that, Xinke Material is 1.61 times more volatile than Will Semiconductor Co. It trades about 0.01 of its total potential returns per unit of risk. Will Semiconductor Co is currently generating about 0.19 per unit of volatility. If you would invest  10,129  in Will Semiconductor Co on December 25, 2024 and sell it today you would earn a total of  3,491  from holding Will Semiconductor Co or generate 34.47% return on investment over 90 days.

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

Xinke Material  vs.  Will Semiconductor Co

Xinke Material

Risk-Adjusted Performance

Weak

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

Will Semiconductor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Will Semiconductor Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Will Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinke Material and Will Semiconductor

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

The idea behind Xinke Material and Will Semiconductor Co 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.