Correlation Between Union Semiconductor and Zhejiang Crystal

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

By analyzing existing cross correlation between Union Semiconductor Co and Zhejiang Crystal Optech, you can compare the effects of market volatilities on Union Semiconductor and Zhejiang Crystal 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 Union Semiconductor with a short position of Zhejiang Crystal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Semiconductor and Zhejiang Crystal.

Diversification Opportunities for Union Semiconductor and Zhejiang Crystal

0.87

Correlation Coefficient

Union Semiconductor  Zhejiang Crystal

Very poor diversification

The 3 months correlation between Union and Zhejiang is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Union Semiconductor Co and Zhejiang Crystal Optech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Crystal Optech and Union 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 Union Semiconductor Co are associated (or correlated) with Zhejiang Crystal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Crystal Optech has no effect on the direction of Union Semiconductor i.e., Union Semiconductor and Zhejiang Crystal go up and down completely randomly.

Pair Corralation between Union Semiconductor and Zhejiang Crystal

Assuming the 90 days trading horizon Union Semiconductor is expected to generate 3.62 times less return on investment than Zhejiang Crystal. In addition to that, Union Semiconductor is 1.1 times more volatile than Zhejiang Crystal Optech. It trades about 0.02 of its total potential returns per unit of risk. Zhejiang Crystal Optech is currently generating about 0.07 per unit of volatility. If you would invest  1,651  in Zhejiang Crystal Optech on September 19, 2024 and sell it today you would earn a total of  419.00  from holding Zhejiang Crystal Optech or generate 25.38% return on investment over 90 days.

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

Union Semiconductor Co  vs.  Zhejiang Crystal Optech

Union Semiconductor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Union Semiconductor Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Union Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhejiang Crystal Optech

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Crystal Optech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Crystal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Union Semiconductor and Zhejiang Crystal

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

The idea behind Union Semiconductor Co and Zhejiang Crystal Optech 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.