Correlation Between Powerchip Semiconductor and Shanghai Commercial

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

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

Diversification Opportunities for Powerchip Semiconductor and Shanghai Commercial

0.44

Correlation Coefficient

Powerchip Semiconductor  Shanghai Commercial

Very weak diversification

The 3 months correlation between Powerchip and Shanghai is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Powerchip Semiconductor Manufa and Shanghai Commercial Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Commercial and Powerchip 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 Powerchip Semiconductor Manufacturing are associated (or correlated) with Shanghai Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Commercial has no effect on the direction of Powerchip Semiconductor i.e., Powerchip Semiconductor and Shanghai Commercial go up and down completely randomly.

Pair Corralation between Powerchip Semiconductor and Shanghai Commercial

Assuming the 90 days trading horizon Powerchip Semiconductor is expected to generate 1.75 times less return on investment than Shanghai Commercial. In addition to that, Powerchip Semiconductor is 3.06 times more volatile than Shanghai Commercial Savings. It trades about 0.03 of its total potential returns per unit of risk. Shanghai Commercial Savings is currently generating about 0.17 per unit of volatility. If you would invest  3,960  in Shanghai Commercial Savings on December 4, 2024 and sell it today you would earn a total of  470.00  from holding Shanghai Commercial Savings or generate 11.87% return on investment over 90 days.

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

Powerchip Semiconductor Manufa  vs.  Shanghai Commercial Savings

Powerchip Semiconductor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Powerchip Semiconductor Manufacturing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Powerchip Semiconductor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shanghai Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Commercial Savings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shanghai Commercial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Powerchip Semiconductor and Shanghai Commercial

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

The idea behind Powerchip Semiconductor Manufacturing and Shanghai Commercial Savings 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.