Correlation Between Yangmei Chemical and Union Semiconductor

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

By analyzing existing cross correlation between Yangmei Chemical Co and Union Semiconductor Co, you can compare the effects of market volatilities on Yangmei Chemical and Union 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 Yangmei Chemical with a short position of Union Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yangmei Chemical and Union Semiconductor.

Diversification Opportunities for Yangmei Chemical and Union Semiconductor

0.29

Correlation Coefficient

Yangmei Chemical  Union Semiconductor

Modest diversification

The 3 months correlation between Yangmei and Union is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Yangmei Chemical Co and Union Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Semiconductor and Yangmei Chemical 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 Yangmei Chemical Co are associated (or correlated) with Union Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Semiconductor has no effect on the direction of Yangmei Chemical i.e., Yangmei Chemical and Union Semiconductor go up and down completely randomly.

Pair Corralation between Yangmei Chemical and Union Semiconductor

Assuming the 90 days trading horizon Yangmei Chemical Co is expected to under-perform the Union Semiconductor. In addition to that, Yangmei Chemical is 1.24 times more volatile than Union Semiconductor Co. It trades about -0.48 of its total potential returns per unit of risk. Union Semiconductor Co is currently generating about -0.27 per unit of volatility. If you would invest  925.00  in Union Semiconductor Co on October 11, 2024 and sell it today you would lose (104.00) from holding Union Semiconductor Co or give up 11.24% of portfolio value over 90 days.

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

Yangmei Chemical Co  vs.  Union Semiconductor Co

Yangmei Chemical

Risk-Adjusted Performance

1 of 100

Very Weak

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

Union Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Semiconductor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Union Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Yangmei Chemical and Union Semiconductor

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

The idea behind Yangmei Chemical Co and Union Semiconductor Co 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.