Correlation Between Cabio Biotech and GigaDevice SemiconductorBei

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

By analyzing existing cross correlation between Cabio Biotech Wuhan and GigaDevice SemiconductorBeiji, you can compare the effects of market volatilities on Cabio Biotech and GigaDevice SemiconductorBei 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 Cabio Biotech with a short position of GigaDevice SemiconductorBei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabio Biotech and GigaDevice SemiconductorBei.

Diversification Opportunities for Cabio Biotech and GigaDevice SemiconductorBei

-0.14

Correlation Coefficient

Cabio Biotech  GigaDevice SemiconductorBei

Good diversification

The 3 months correlation between Cabio and GigaDevice is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cabio Biotech Wuhan and GigaDevice SemiconductorBeiji in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaDevice SemiconductorBei and Cabio Biotech 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 Cabio Biotech Wuhan are associated (or correlated) with GigaDevice SemiconductorBei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaDevice SemiconductorBei has no effect on the direction of Cabio Biotech i.e., Cabio Biotech and GigaDevice SemiconductorBei go up and down completely randomly.

Pair Corralation between Cabio Biotech and GigaDevice SemiconductorBei

Assuming the 90 days trading horizon Cabio Biotech is expected to generate 6.61 times less return on investment than GigaDevice SemiconductorBei. In addition to that, Cabio Biotech is 1.23 times more volatile than GigaDevice SemiconductorBeiji. It trades about 0.01 of its total potential returns per unit of risk. GigaDevice SemiconductorBeiji is currently generating about 0.07 per unit of volatility. If you would invest  9,310  in GigaDevice SemiconductorBeiji on October 9, 2024 and sell it today you would earn a total of  1,210  from holding GigaDevice SemiconductorBeiji or generate 13.0% return on investment over 90 days.

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

Cabio Biotech Wuhan  vs.  GigaDevice SemiconductorBeiji

Cabio Biotech Wuhan

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Cabio Biotech and GigaDevice SemiconductorBei

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

The idea behind Cabio Biotech Wuhan and GigaDevice SemiconductorBeiji 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.