Correlation Between GigaDevice SemiconductorBei and Hengli Industrial

Can any of the company-specific risk be diversified away by investing in both GigaDevice SemiconductorBei and Hengli Industrial 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 GigaDevice SemiconductorBei and Hengli Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GigaDevice SemiconductorBeiji and Hengli Industrial Development, you can compare the effects of market volatilities on GigaDevice SemiconductorBei and Hengli Industrial 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 GigaDevice SemiconductorBei with a short position of Hengli Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaDevice SemiconductorBei and Hengli Industrial.

Diversification Opportunities for GigaDevice SemiconductorBei and Hengli Industrial

0.08

Correlation Coefficient

GigaDevice SemiconductorBei  Hengli Industrial

Significant diversification

The 3 months correlation between GigaDevice and Hengli is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding GigaDevice SemiconductorBeiji and Hengli Industrial Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengli Industrial and GigaDevice SemiconductorBei 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 GigaDevice SemiconductorBeiji are associated (or correlated) with Hengli Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengli Industrial has no effect on the direction of GigaDevice SemiconductorBei i.e., GigaDevice SemiconductorBei and Hengli Industrial go up and down completely randomly.

Pair Corralation between GigaDevice SemiconductorBei and Hengli Industrial

Assuming the 90 days trading horizon GigaDevice SemiconductorBeiji is expected to under-perform the Hengli Industrial. But the stock apears to be less risky and, when comparing its historical volatility, GigaDevice SemiconductorBeiji is 1.12 times less risky than Hengli Industrial. The stock trades about -0.06 of its potential returns per unit of risk. The Hengli Industrial Development is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  219.00  in Hengli Industrial Development on December 4, 2024 and sell it today you would earn a total of  54.00  from holding Hengli Industrial Development or generate 24.66% return on investment over 90 days.

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

GigaDevice SemiconductorBeiji  vs.  Hengli Industrial Development

GigaDevice SemiconductorBei

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaDevice SemiconductorBeiji are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GigaDevice SemiconductorBei sustained solid returns over the last few months and may actually be approaching a breakup point.

Hengli Industrial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Industrial Development are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengli Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GigaDevice SemiconductorBei and Hengli Industrial

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

The idea behind GigaDevice SemiconductorBeiji and Hengli Industrial Development 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.