Correlation Between Zhangjiagang Freetrade and Southchip Semiconductor

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

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

Diversification Opportunities for Zhangjiagang Freetrade and Southchip Semiconductor

0.75

Correlation Coefficient

Zhangjiagang Freetrade  Southchip Semiconductor

Poor diversification

The 3 months correlation between Zhangjiagang and Southchip is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Zhangjiagang Freetrade Science and Southchip Semiconductor Techno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southchip Semiconductor and Zhangjiagang Freetrade 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 Zhangjiagang Freetrade Science are associated (or correlated) with Southchip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southchip Semiconductor has no effect on the direction of Zhangjiagang Freetrade i.e., Zhangjiagang Freetrade and Southchip Semiconductor go up and down completely randomly.

Pair Corralation between Zhangjiagang Freetrade and Southchip Semiconductor

Assuming the 90 days trading horizon Zhangjiagang Freetrade Science is expected to generate 0.83 times more return on investment than Southchip Semiconductor. However, Zhangjiagang Freetrade Science is 1.21 times less risky than Southchip Semiconductor. It trades about -0.01 of its potential returns per unit of risk. Southchip Semiconductor Technology is currently generating about -0.08 per unit of risk. If you would invest  360.00  in Zhangjiagang Freetrade Science on October 7, 2024 and sell it today you would lose (12.00) from holding Zhangjiagang Freetrade Science or give up 3.33% of portfolio value over 90 days.

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

Zhangjiagang Freetrade Science  vs.  Southchip Semiconductor Techno

Zhangjiagang Freetrade

Risk-Adjusted Performance

0 of 100

Very Weak

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

Southchip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southchip Semiconductor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zhangjiagang Freetrade and Southchip Semiconductor

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

The idea behind Zhangjiagang Freetrade Science and Southchip 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.