Correlation Between Gome Telecom and Semiconductor Manufacturing

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

By analyzing existing cross correlation between Gome Telecom Equipment and Semiconductor Manufacturing Electronics, you can compare the effects of market volatilities on Gome Telecom 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 Gome Telecom with a short position of Semiconductor Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gome Telecom and Semiconductor Manufacturing.

Diversification Opportunities for Gome Telecom and Semiconductor Manufacturing

0.59

Correlation Coefficient

Gome Telecom  Semiconductor Manufacturing

Very weak diversification

The 3 months correlation between Gome and Semiconductor is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Gome Telecom Equipment and Semiconductor Manufacturing El in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Manufacturing and Gome Telecom 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 Gome Telecom Equipment 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 Gome Telecom i.e., Gome Telecom and Semiconductor Manufacturing go up and down completely randomly.

Pair Corralation between Gome Telecom and Semiconductor Manufacturing

Assuming the 90 days trading horizon Gome Telecom is expected to generate 4.39 times less return on investment than Semiconductor Manufacturing. But when comparing it to its historical volatility, Gome Telecom Equipment is 1.16 times less risky than Semiconductor Manufacturing. It trades about 0.07 of its potential returns per unit of risk. Semiconductor Manufacturing Electronics is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  339.00  in Semiconductor Manufacturing Electronics on September 10, 2024 and sell it today you would earn a total of  256.00  from holding Semiconductor Manufacturing Electronics or generate 75.52% return on investment over 90 days.

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

Gome Telecom Equipment  vs.  Semiconductor Manufacturing El

Gome Telecom Equipment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gome Telecom Equipment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gome Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Semiconductor Manufacturing

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing Electronics are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Semiconductor Manufacturing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gome Telecom and Semiconductor Manufacturing

The main advantage of trading using opposite Gome Telecom and Semiconductor Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gome Telecom 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 Gome Telecom Equipment 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.