Correlation Between GigaDevice SemiconductorBei and Guangzhou Hongli

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

By analyzing existing cross correlation between GigaDevice SemiconductorBeiji and Guangzhou Hongli Opto, you can compare the effects of market volatilities on GigaDevice SemiconductorBei and Guangzhou Hongli 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 Guangzhou Hongli. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaDevice SemiconductorBei and Guangzhou Hongli.

Diversification Opportunities for GigaDevice SemiconductorBei and Guangzhou Hongli

0.17

Correlation Coefficient

GigaDevice SemiconductorBei  Guangzhou Hongli

Average diversification

The 3 months correlation between GigaDevice and Guangzhou is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding GigaDevice SemiconductorBeiji and Guangzhou Hongli Opto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Hongli Opto 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 Guangzhou Hongli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Hongli Opto has no effect on the direction of GigaDevice SemiconductorBei i.e., GigaDevice SemiconductorBei and Guangzhou Hongli go up and down completely randomly.

Pair Corralation between GigaDevice SemiconductorBei and Guangzhou Hongli

Assuming the 90 days trading horizon GigaDevice SemiconductorBeiji is expected to generate 1.59 times more return on investment than Guangzhou Hongli. However, GigaDevice SemiconductorBei is 1.59 times more volatile than Guangzhou Hongli Opto. It trades about 0.26 of its potential returns per unit of risk. Guangzhou Hongli Opto is currently generating about -0.2 per unit of risk. If you would invest  8,332  in GigaDevice SemiconductorBeiji on October 9, 2024 and sell it today you would earn a total of  2,188  from holding GigaDevice SemiconductorBeiji or generate 26.26% 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.  Guangzhou Hongli Opto

GigaDevice SemiconductorBei

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GigaDevice SemiconductorBeiji are ranked lower than 5 (%) 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.

Guangzhou Hongli Opto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangzhou Hongli Opto has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangzhou Hongli is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GigaDevice SemiconductorBei and Guangzhou Hongli

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

The idea behind GigaDevice SemiconductorBeiji and Guangzhou Hongli Opto 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.