Correlation Between Ningbo Construction and Semiconductor Manufacturing

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

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

Diversification Opportunities for Ningbo Construction and Semiconductor Manufacturing

0.84

Correlation Coefficient

Ningbo Construction  Semiconductor Manufacturing

Very poor diversification

The 3 months correlation between Ningbo and Semiconductor is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Construction Co and Semiconductor Manufacturing El in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Manufacturing and Ningbo Construction 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 Ningbo Construction Co 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 Ningbo Construction i.e., Ningbo Construction and Semiconductor Manufacturing go up and down completely randomly.

Pair Corralation between Ningbo Construction and Semiconductor Manufacturing

Assuming the 90 days trading horizon Ningbo Construction is expected to generate 1.68 times less return on investment than Semiconductor Manufacturing. In addition to that, Ningbo Construction is 1.0 times more volatile than Semiconductor Manufacturing Electronics. It trades about 0.07 of its total potential returns per unit of risk. Semiconductor Manufacturing Electronics is currently generating about 0.11 per unit of volatility. If you would invest  423.00  in Semiconductor Manufacturing Electronics on September 29, 2024 and sell it today you would earn a total of  106.00  from holding Semiconductor Manufacturing Electronics or generate 25.06% return on investment over 90 days.

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

Ningbo Construction Co  vs.  Semiconductor Manufacturing El

Ningbo Construction

Risk-Adjusted Performance

5 of 100

Modest

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

Semiconductor Manufacturing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing Electronics are ranked lower than 9 (%) 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 Ningbo Construction and Semiconductor Manufacturing

The main advantage of trading using opposite Ningbo Construction and Semiconductor Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ningbo Construction 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 Ningbo Construction Co 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.