Correlation Between Xinke Material and Yuanjie Semiconductor

Can any of the company-specific risk be diversified away by investing in both Xinke Material and Yuanjie 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 Yuanjie 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 Yuanjie Semiconductor Technology, you can compare the effects of market volatilities on Xinke Material and Yuanjie 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 Yuanjie Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinke Material and Yuanjie Semiconductor.

Diversification Opportunities for Xinke Material and Yuanjie Semiconductor

-0.42

Correlation Coefficient

Xinke Material  Yuanjie Semiconductor

Very good diversification

The 3 months correlation between Xinke and Yuanjie is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Xinke Material and Yuanjie Semiconductor Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanjie 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 Yuanjie Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanjie Semiconductor has no effect on the direction of Xinke Material i.e., Xinke Material and Yuanjie Semiconductor go up and down completely randomly.

Pair Corralation between Xinke Material and Yuanjie Semiconductor

Assuming the 90 days trading horizon Xinke Material is expected to generate 1.68 times less return on investment than Yuanjie Semiconductor. But when comparing it to its historical volatility, Xinke Material is 1.84 times less risky than Yuanjie Semiconductor. It trades about 0.04 of its potential returns per unit of risk. Yuanjie Semiconductor Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,897  in Yuanjie Semiconductor Technology on October 11, 2024 and sell it today you would earn a total of  3,903  from holding Yuanjie Semiconductor Technology or generate 39.44% return on investment over 90 days.

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

Xinke Material  vs.  Yuanjie Semiconductor Technolo

Xinke Material

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xinke Material are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinke Material sustained solid returns over the last few months and may actually be approaching a breakup point.

Yuanjie Semiconductor

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanjie Semiconductor Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yuanjie Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinke Material and Yuanjie Semiconductor

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

The idea behind Xinke Material and Yuanjie 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.