Correlation Between Dalian Thermal and GRINM Semiconductor

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

By analyzing existing cross correlation between Dalian Thermal Power and GRINM Semiconductor Materials, you can compare the effects of market volatilities on Dalian Thermal and GRINM 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 Dalian Thermal with a short position of GRINM Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalian Thermal and GRINM Semiconductor.

Diversification Opportunities for Dalian Thermal and GRINM Semiconductor

0.45

Correlation Coefficient

Dalian Thermal  GRINM Semiconductor

Very weak diversification

The 3 months correlation between Dalian and GRINM is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dalian Thermal Power and GRINM Semiconductor Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRINM Semiconductor and Dalian Thermal 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 Dalian Thermal Power are associated (or correlated) with GRINM Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRINM Semiconductor has no effect on the direction of Dalian Thermal i.e., Dalian Thermal and GRINM Semiconductor go up and down completely randomly.

Pair Corralation between Dalian Thermal and GRINM Semiconductor

Assuming the 90 days trading horizon Dalian Thermal Power is expected to generate 0.89 times more return on investment than GRINM Semiconductor. However, Dalian Thermal Power is 1.12 times less risky than GRINM Semiconductor. It trades about 0.02 of its potential returns per unit of risk. GRINM Semiconductor Materials is currently generating about 0.01 per unit of risk. If you would invest  710.00  in Dalian Thermal Power on December 25, 2024 and sell it today you would earn a total of  11.00  from holding Dalian Thermal Power or generate 1.55% return on investment over 90 days.

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

Dalian Thermal Power  vs.  GRINM Semiconductor Materials

Dalian Thermal Power

Risk-Adjusted Performance

Weak

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

GRINM Semiconductor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GRINM Semiconductor Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GRINM 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 Dalian Thermal and GRINM Semiconductor

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

The idea behind Dalian Thermal Power and GRINM Semiconductor Materials 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.