Correlation Between Mengtian Home and StarPower Semiconductor

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

By analyzing existing cross correlation between Mengtian Home Group and StarPower Semiconductor, you can compare the effects of market volatilities on Mengtian Home and StarPower 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 Mengtian Home with a short position of StarPower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mengtian Home and StarPower Semiconductor.

Diversification Opportunities for Mengtian Home and StarPower Semiconductor

-0.14

Correlation Coefficient

Mengtian Home  StarPower Semiconductor

Good diversification

The 3 months correlation between Mengtian and StarPower is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Mengtian Home Group and StarPower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StarPower Semiconductor and Mengtian Home 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 Mengtian Home Group are associated (or correlated) with StarPower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StarPower Semiconductor has no effect on the direction of Mengtian Home i.e., Mengtian Home and StarPower Semiconductor go up and down completely randomly.

Pair Corralation between Mengtian Home and StarPower Semiconductor

Assuming the 90 days trading horizon Mengtian Home Group is expected to generate 3.06 times more return on investment than StarPower Semiconductor. However, Mengtian Home is 3.06 times more volatile than StarPower Semiconductor. It trades about 0.02 of its potential returns per unit of risk. StarPower Semiconductor is currently generating about -0.47 per unit of risk. If you would invest  1,089  in Mengtian Home Group on October 11, 2024 and sell it today you would lose (9.00) from holding Mengtian Home Group or give up 0.83% of portfolio value over 90 days.

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

Mengtian Home Group  vs.  StarPower Semiconductor

Mengtian Home Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mengtian Home may actually be approaching a critical reversion point that can send shares even higher in February 2025.

StarPower Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days StarPower Semiconductor 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 Mengtian Home and StarPower Semiconductor

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

The idea behind Mengtian Home Group and StarPower Semiconductor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.