Correlation Between Union Semiconductor and Shantou Wanshun

Can any of the company-specific risk be diversified away by investing in both Union Semiconductor and Shantou Wanshun 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 Shantou Wanshun 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 Shantou Wanshun Package, you can compare the effects of market volatilities on Union Semiconductor and Shantou Wanshun 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 Shantou Wanshun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Semiconductor and Shantou Wanshun.

Diversification Opportunities for Union Semiconductor and Shantou Wanshun

0.66

Correlation Coefficient

Union Semiconductor  Shantou Wanshun

Poor diversification

The 3 months correlation between Union and Shantou is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Union Semiconductor Co and Shantou Wanshun Package in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shantou Wanshun Package 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 Shantou Wanshun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shantou Wanshun Package has no effect on the direction of Union Semiconductor i.e., Union Semiconductor and Shantou Wanshun go up and down completely randomly.

Pair Corralation between Union Semiconductor and Shantou Wanshun

Assuming the 90 days trading horizon Union Semiconductor Co is expected to generate 0.56 times more return on investment than Shantou Wanshun. However, Union Semiconductor Co is 1.78 times less risky than Shantou Wanshun. It trades about 0.07 of its potential returns per unit of risk. Shantou Wanshun Package is currently generating about -0.02 per unit of risk. If you would invest  932.00  in Union Semiconductor Co on December 3, 2024 and sell it today you would earn a total of  71.00  from holding Union Semiconductor Co or generate 7.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Union Semiconductor Co  vs.  Shantou Wanshun Package

Union Semiconductor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Union Semiconductor Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Union Semiconductor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shantou Wanshun Package

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Union Semiconductor and Shantou Wanshun

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

The idea behind Union Semiconductor Co and Shantou Wanshun Package 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.