Correlation Between StarPower Semiconductor and Chengtun Mining

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

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

Diversification Opportunities for StarPower Semiconductor and Chengtun Mining

0.89

Correlation Coefficient

StarPower Semiconductor  Chengtun Mining

Very poor diversification

The 3 months correlation between StarPower and Chengtun is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding StarPower Semiconductor and Chengtun Mining Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengtun Mining Group and StarPower Semiconductor 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 StarPower Semiconductor are associated (or correlated) with Chengtun Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengtun Mining Group has no effect on the direction of StarPower Semiconductor i.e., StarPower Semiconductor and Chengtun Mining go up and down completely randomly.

Pair Corralation between StarPower Semiconductor and Chengtun Mining

Assuming the 90 days trading horizon StarPower Semiconductor is expected to generate 1.57 times more return on investment than Chengtun Mining. However, StarPower Semiconductor is 1.57 times more volatile than Chengtun Mining Group. It trades about 0.16 of its potential returns per unit of risk. Chengtun Mining Group is currently generating about 0.18 per unit of risk. If you would invest  7,140  in StarPower Semiconductor on September 2, 2024 and sell it today you would earn a total of  2,892  from holding StarPower Semiconductor or generate 40.5% return on investment over 90 days.

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

StarPower Semiconductor  vs.  Chengtun Mining Group

StarPower Semiconductor

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in StarPower Semiconductor are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, StarPower Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Chengtun Mining Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengtun Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with StarPower Semiconductor and Chengtun Mining

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

The idea behind StarPower Semiconductor and Chengtun Mining Group 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.

Check out your portfolio center.

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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.