Correlation Between Long Yuan and Yuanjie Semiconductor

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

By analyzing existing cross correlation between Long Yuan Construction and Yuanjie Semiconductor Technology, you can compare the effects of market volatilities on Long Yuan 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 Long Yuan with a short position of Yuanjie Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Yuan and Yuanjie Semiconductor.

Diversification Opportunities for Long Yuan and Yuanjie Semiconductor

0.47

Correlation Coefficient

Long Yuan  Yuanjie Semiconductor

Very weak diversification

The 3 months correlation between Long and Yuanjie is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Long Yuan Construction and Yuanjie Semiconductor Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanjie Semiconductor and Long Yuan 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 Long Yuan Construction 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 Long Yuan i.e., Long Yuan and Yuanjie Semiconductor go up and down completely randomly.

Pair Corralation between Long Yuan and Yuanjie Semiconductor

Assuming the 90 days trading horizon Long Yuan Construction is expected to under-perform the Yuanjie Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Long Yuan Construction is 1.47 times less risky than Yuanjie Semiconductor. The stock trades about -0.4 of its potential returns per unit of risk. The Yuanjie Semiconductor Technology is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  15,214  in Yuanjie Semiconductor Technology on October 7, 2024 and sell it today you would lose (2,416) from holding Yuanjie Semiconductor Technology or give up 15.88% of portfolio value over 90 days.

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

Long Yuan Construction  vs.  Yuanjie Semiconductor Technolo

Long Yuan Construction

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Long Yuan Construction are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Long Yuan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Yuanjie Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yuanjie Semiconductor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Long Yuan and Yuanjie Semiconductor

The main advantage of trading using opposite Long Yuan and Yuanjie Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long Yuan 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 Long Yuan Construction 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.