Correlation Between Xinjiang Tianrun and Lontium Semiconductor

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

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

Diversification Opportunities for Xinjiang Tianrun and Lontium Semiconductor

0.43

Correlation Coefficient

Xinjiang Tianrun  Lontium Semiconductor

Very weak diversification

The 3 months correlation between Xinjiang and Lontium is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Tianrun Dairy and Lontium Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lontium Semiconductor and Xinjiang Tianrun 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 Xinjiang Tianrun Dairy are associated (or correlated) with Lontium Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lontium Semiconductor has no effect on the direction of Xinjiang Tianrun i.e., Xinjiang Tianrun and Lontium Semiconductor go up and down completely randomly.

Pair Corralation between Xinjiang Tianrun and Lontium Semiconductor

Assuming the 90 days trading horizon Xinjiang Tianrun Dairy is expected to under-perform the Lontium Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Xinjiang Tianrun Dairy is 2.05 times less risky than Lontium Semiconductor. The stock trades about -0.28 of its potential returns per unit of risk. The Lontium Semiconductor Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,230  in Lontium Semiconductor Corp on October 12, 2024 and sell it today you would earn a total of  888.00  from holding Lontium Semiconductor Corp or generate 12.28% return on investment over 90 days.

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

Xinjiang Tianrun Dairy  vs.  Lontium Semiconductor Corp

Xinjiang Tianrun Dairy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Tianrun Dairy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xinjiang Tianrun is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lontium Semiconductor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lontium Semiconductor Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lontium Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinjiang Tianrun and Lontium Semiconductor

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

The idea behind Xinjiang Tianrun Dairy and Lontium 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.