Correlation Between Guotai Epoint and Thinkon Semiconductor

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

By analyzing existing cross correlation between Guotai Epoint Software and Thinkon Semiconductor Jinzhou, you can compare the effects of market volatilities on Guotai Epoint and Thinkon Semiconductor 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 Guotai Epoint with a short position of Thinkon Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guotai Epoint and Thinkon Semiconductor.

Diversification Opportunities for Guotai Epoint and Thinkon Semiconductor

0.25

Correlation Coefficient

Guotai Epoint  Thinkon Semiconductor

Modest diversification

The 3 months correlation between Guotai and Thinkon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Guotai Epoint Software and Thinkon Semiconductor Jinzhou in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thinkon Semiconductor and Guotai Epoint 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 Guotai Epoint Software are associated (or correlated) with Thinkon Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thinkon Semiconductor has no effect on the direction of Guotai Epoint i.e., Guotai Epoint and Thinkon Semiconductor go up and down completely randomly.

Pair Corralation between Guotai Epoint and Thinkon Semiconductor

Assuming the 90 days trading horizon Guotai Epoint Software is expected to under-perform the Thinkon Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Guotai Epoint Software is 1.42 times less risky than Thinkon Semiconductor. The stock trades about -0.52 of its potential returns per unit of risk. The Thinkon Semiconductor Jinzhou is currently generating about -0.28 of returns per unit of risk over similar time horizon. If you would invest  2,596  in Thinkon Semiconductor Jinzhou on October 11, 2024 and sell it today you would lose (394.00) from holding Thinkon Semiconductor Jinzhou or give up 15.18% of portfolio value over 90 days.

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

Guotai Epoint Software  vs.  Thinkon Semiconductor Jinzhou

Guotai Epoint Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guotai Epoint Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Thinkon Semiconductor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thinkon Semiconductor Jinzhou are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Thinkon Semiconductor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Guotai Epoint and Thinkon Semiconductor

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

The idea behind Guotai Epoint Software and Thinkon Semiconductor Jinzhou 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.