Correlation Between Union Semiconductor and Qijing Machinery

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

Diversification Opportunities for Union Semiconductor and Qijing Machinery

0.23

Correlation Coefficient

Union Semiconductor  Qijing Machinery

Modest diversification

The 3 months correlation between Union and Qijing is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Union Semiconductor Co and Qijing Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qijing Machinery 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 Qijing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qijing Machinery has no effect on the direction of Union Semiconductor i.e., Union Semiconductor and Qijing Machinery go up and down completely randomly.

Pair Corralation between Union Semiconductor and Qijing Machinery

Assuming the 90 days trading horizon Union Semiconductor Co is expected to under-perform the Qijing Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Union Semiconductor Co is 1.56 times less risky than Qijing Machinery. The stock trades about -0.17 of its potential returns per unit of risk. The Qijing Machinery is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,290  in Qijing Machinery on October 22, 2024 and sell it today you would earn a total of  166.00  from holding Qijing Machinery or generate 12.87% return on investment over 90 days.

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

Union Semiconductor Co  vs.  Qijing Machinery

Union Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Semiconductor Co 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.

Qijing Machinery

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Qijing Machinery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qijing Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Union Semiconductor and Qijing Machinery

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

The idea behind Union Semiconductor Co and Qijing Machinery 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.