Correlation Between Hubei Geoway and Nexchip Semiconductor

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

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

Diversification Opportunities for Hubei Geoway and Nexchip Semiconductor

0.57

Correlation Coefficient

Hubei Geoway  Nexchip Semiconductor

Very weak diversification

The 3 months correlation between Hubei and Nexchip is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Geoway Investment and Nexchip Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexchip Semiconductor and Hubei Geoway 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 Geoway Investment are associated (or correlated) with Nexchip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexchip Semiconductor has no effect on the direction of Hubei Geoway i.e., Hubei Geoway and Nexchip Semiconductor go up and down completely randomly.

Pair Corralation between Hubei Geoway and Nexchip Semiconductor

Assuming the 90 days trading horizon Hubei Geoway Investment is expected to under-perform the Nexchip Semiconductor. In addition to that, Hubei Geoway is 1.75 times more volatile than Nexchip Semiconductor Corp. It trades about -0.15 of its total potential returns per unit of risk. Nexchip Semiconductor Corp is currently generating about -0.13 per unit of volatility. If you would invest  2,467  in Nexchip Semiconductor Corp on October 23, 2024 and sell it today you would lose (149.00) from holding Nexchip Semiconductor Corp or give up 6.04% of portfolio value over 90 days.

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

Hubei Geoway Investment  vs.  Nexchip Semiconductor Corp

Hubei Geoway Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Geoway Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Geoway sustained solid returns over the last few months and may actually be approaching a breakup point.

Nexchip Semiconductor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nexchip Semiconductor Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nexchip Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubei Geoway and Nexchip Semiconductor

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

The idea behind Hubei Geoway Investment and Nexchip 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.