Correlation Between Hubei Geoway and Semiconductor Manufacturing

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

Diversification Opportunities for Hubei Geoway and Semiconductor Manufacturing

0.64

Correlation Coefficient

Hubei Geoway  Semiconductor Manufacturing

Poor diversification

The 3 months correlation between Hubei and Semiconductor is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Geoway Investment and Semiconductor Manufacturing El in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Manufacturing 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 Semiconductor Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semiconductor Manufacturing has no effect on the direction of Hubei Geoway i.e., Hubei Geoway and Semiconductor Manufacturing go up and down completely randomly.

Pair Corralation between Hubei Geoway and Semiconductor Manufacturing

Assuming the 90 days trading horizon Hubei Geoway is expected to generate 1.59 times less return on investment than Semiconductor Manufacturing. But when comparing it to its historical volatility, Hubei Geoway Investment is 1.01 times less risky than Semiconductor Manufacturing. It trades about 0.06 of its potential returns per unit of risk. Semiconductor Manufacturing Electronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  381.00  in Semiconductor Manufacturing Electronics on October 4, 2024 and sell it today you would earn a total of  132.00  from holding Semiconductor Manufacturing Electronics or generate 34.65% return on investment over 90 days.

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

Hubei Geoway Investment  vs.  Semiconductor Manufacturing El

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 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Semiconductor Manufacturing

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Hubei Geoway and Semiconductor Manufacturing

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

The idea behind Hubei Geoway Investment and Semiconductor Manufacturing Electronics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.