Correlation Between Holtek Semiconductor and China Steel

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

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

Diversification Opportunities for Holtek Semiconductor and China Steel

0.22

Correlation Coefficient

Holtek Semiconductor  China Steel

Modest diversification

The 3 months correlation between Holtek and China is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Holtek Semiconductor and China Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Corp and Holtek 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 Holtek Semiconductor are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Corp has no effect on the direction of Holtek Semiconductor i.e., Holtek Semiconductor and China Steel go up and down completely randomly.

Pair Corralation between Holtek Semiconductor and China Steel

Assuming the 90 days trading horizon Holtek Semiconductor is expected to under-perform the China Steel. But the stock apears to be less risky and, when comparing its historical volatility, Holtek Semiconductor is 23.98 times less risky than China Steel. The stock trades about -0.02 of its potential returns per unit of risk. The China Steel Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,478  in China Steel Corp on December 4, 2024 and sell it today you would lose (458.00) from holding China Steel Corp or give up 10.23% of portfolio value over 90 days.

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

Holtek Semiconductor  vs.  China Steel Corp

Holtek Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Holtek Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Holtek Semiconductor is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

China Steel Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, China Steel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Holtek Semiconductor and China Steel

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

The idea behind Holtek Semiconductor and China Steel Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.