Correlation Between GigaDevice SemiconductorBei and Weihai Honglin

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

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

Diversification Opportunities for GigaDevice SemiconductorBei and Weihai Honglin

0.48

Correlation Coefficient

GigaDevice SemiconductorBei  Weihai Honglin

Very weak diversification

The 3 months correlation between GigaDevice and Weihai is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding GigaDevice SemiconductorBeiji and Weihai Honglin Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weihai Honglin Electronic 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 Weihai Honglin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weihai Honglin Electronic has no effect on the direction of GigaDevice SemiconductorBei i.e., GigaDevice SemiconductorBei and Weihai Honglin go up and down completely randomly.

Pair Corralation between GigaDevice SemiconductorBei and Weihai Honglin

Assuming the 90 days trading horizon GigaDevice SemiconductorBeiji is expected to generate 1.54 times more return on investment than Weihai Honglin. However, GigaDevice SemiconductorBei is 1.54 times more volatile than Weihai Honglin Electronic. It trades about 0.38 of its potential returns per unit of risk. Weihai Honglin Electronic is currently generating about 0.1 per unit of risk. If you would invest  8,421  in GigaDevice SemiconductorBeiji on October 12, 2024 and sell it today you would earn a total of  3,869  from holding GigaDevice SemiconductorBeiji or generate 45.94% return on investment over 90 days.

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

GigaDevice SemiconductorBeiji  vs.  Weihai Honglin Electronic

GigaDevice SemiconductorBei

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaDevice SemiconductorBeiji are ranked lower than 13 (%) 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.

Weihai Honglin Electronic

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Weihai Honglin Electronic are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Weihai Honglin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GigaDevice SemiconductorBei and Weihai Honglin

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

The idea behind GigaDevice SemiconductorBeiji and Weihai Honglin Electronic 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.