Correlation Between China International and Shannon Semiconductor

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

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

Diversification Opportunities for China International and Shannon Semiconductor

0.62

Correlation Coefficient

China International  Shannon Semiconductor

Poor diversification

The 3 months correlation between China and Shannon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding China International Capital and Shannon Semiconductor Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shannon Semiconductor and China International 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 China International Capital are associated (or correlated) with Shannon Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shannon Semiconductor has no effect on the direction of China International i.e., China International and Shannon Semiconductor go up and down completely randomly.

Pair Corralation between China International and Shannon Semiconductor

Assuming the 90 days trading horizon China International Capital is expected to under-perform the Shannon Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, China International Capital is 1.39 times less risky than Shannon Semiconductor. The stock trades about -0.39 of its potential returns per unit of risk. The Shannon Semiconductor Technology is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  3,008  in Shannon Semiconductor Technology on October 6, 2024 and sell it today you would lose (333.00) from holding Shannon Semiconductor Technology or give up 11.07% of portfolio value over 90 days.

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

China International Capital  vs.  Shannon Semiconductor Technolo

China International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China International Capital 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.

Shannon Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shannon 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 China International and Shannon Semiconductor

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

The idea behind China International Capital and Shannon 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.