Correlation Between Shanghai Action and Semiconductor Manufacturing

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

By analyzing existing cross correlation between Shanghai Action Education and Semiconductor Manufacturing Electronics, you can compare the effects of market volatilities on Shanghai Action and Semiconductor Manufacturing 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 Shanghai Action with a short position of Semiconductor Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Action and Semiconductor Manufacturing.

Diversification Opportunities for Shanghai Action and Semiconductor Manufacturing

-0.23

Correlation Coefficient

Shanghai Action  Semiconductor Manufacturing

Very good diversification

The 3 months correlation between Shanghai and Semiconductor is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Action Education and Semiconductor Manufacturing El in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Manufacturing and Shanghai Action 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 Shanghai Action Education are associated (or correlated) with Semiconductor Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semiconductor Manufacturing has no effect on the direction of Shanghai Action i.e., Shanghai Action and Semiconductor Manufacturing go up and down completely randomly.

Pair Corralation between Shanghai Action and Semiconductor Manufacturing

Assuming the 90 days trading horizon Shanghai Action Education is expected to under-perform the Semiconductor Manufacturing. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Action Education is 1.08 times less risky than Semiconductor Manufacturing. The stock trades about -0.09 of its potential returns per unit of risk. The Semiconductor Manufacturing Electronics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Semiconductor Manufacturing Electronics on October 4, 2024 and sell it today you would earn a total of  13.00  from holding Semiconductor Manufacturing Electronics or generate 2.6% return on investment over 90 days.

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

Shanghai Action Education  vs.  Semiconductor Manufacturing El

Shanghai Action Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Action Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Semiconductor Manufacturing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Semiconductor Manufacturing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shanghai Action and Semiconductor Manufacturing

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

The idea behind Shanghai Action Education and Semiconductor Manufacturing Electronics 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.