Correlation Between Xiamen Goldenhome and Southchip Semiconductor

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

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

Diversification Opportunities for Xiamen Goldenhome and Southchip Semiconductor

0.77

Correlation Coefficient

Xiamen Goldenhome  Southchip Semiconductor

Poor diversification

The 3 months correlation between Xiamen and Southchip is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen Goldenhome Co and Southchip Semiconductor Techno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southchip Semiconductor and Xiamen Goldenhome 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 Xiamen Goldenhome Co 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 Xiamen Goldenhome i.e., Xiamen Goldenhome and Southchip Semiconductor go up and down completely randomly.

Pair Corralation between Xiamen Goldenhome and Southchip Semiconductor

Assuming the 90 days trading horizon Xiamen Goldenhome Co is expected to generate 0.87 times more return on investment than Southchip Semiconductor. However, Xiamen Goldenhome Co is 1.15 times less risky than Southchip Semiconductor. It trades about 0.07 of its potential returns per unit of risk. Southchip Semiconductor Technology is currently generating about 0.0 per unit of risk. If you would invest  1,863  in Xiamen Goldenhome Co on October 24, 2024 and sell it today you would earn a total of  168.00  from holding Xiamen Goldenhome Co or generate 9.02% return on investment over 90 days.

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

Xiamen Goldenhome Co  vs.  Southchip Semiconductor Techno

Xiamen Goldenhome

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Goldenhome Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Goldenhome may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 somewhat strong basic indicators, Southchip Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xiamen Goldenhome and Southchip Semiconductor

The main advantage of trading using opposite Xiamen Goldenhome and Southchip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiamen Goldenhome 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 Xiamen Goldenhome Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.