Correlation Between Shandong Publishing and Nexchip Semiconductor

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

By analyzing existing cross correlation between Shandong Publishing Media and Nexchip Semiconductor Corp, you can compare the effects of market volatilities on Shandong Publishing and Nexchip 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 Shandong Publishing with a short position of Nexchip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Publishing and Nexchip Semiconductor.

Diversification Opportunities for Shandong Publishing and Nexchip Semiconductor

0.3

Correlation Coefficient

Shandong Publishing  Nexchip Semiconductor

Weak diversification

The 3 months correlation between Shandong and Nexchip is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and Nexchip Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexchip Semiconductor and Shandong Publishing 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 Shandong Publishing Media are associated (or correlated) with Nexchip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexchip Semiconductor has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and Nexchip Semiconductor go up and down completely randomly.

Pair Corralation between Shandong Publishing and Nexchip Semiconductor

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the Nexchip Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Publishing Media is 2.45 times less risky than Nexchip Semiconductor. The stock trades about -0.33 of its potential returns per unit of risk. The Nexchip Semiconductor Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,366  in Nexchip Semiconductor Corp on December 1, 2024 and sell it today you would earn a total of  8.00  from holding Nexchip Semiconductor Corp or generate 0.34% return on investment over 90 days.

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

Shandong Publishing Media  vs.  Nexchip Semiconductor Corp

Shandong Publishing Media

Risk-Adjusted Performance

Very Weak

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

Nexchip Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nexchip Semiconductor Corp 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 Shandong Publishing and Nexchip Semiconductor

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

The idea behind Shandong Publishing Media and Nexchip Semiconductor Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.