Correlation Between GRINM Semiconductor and Tongling Nonferrous

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

By analyzing existing cross correlation between GRINM Semiconductor Materials and Tongling Nonferrous Metals, you can compare the effects of market volatilities on GRINM Semiconductor and Tongling Nonferrous 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 GRINM Semiconductor with a short position of Tongling Nonferrous. Check out your portfolio center. Please also check ongoing floating volatility patterns of GRINM Semiconductor and Tongling Nonferrous.

Diversification Opportunities for GRINM Semiconductor and Tongling Nonferrous

0.29

Correlation Coefficient

GRINM Semiconductor  Tongling Nonferrous

Modest diversification

The 3 months correlation between GRINM and Tongling is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding GRINM Semiconductor Materials and Tongling Nonferrous Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongling Nonferrous and GRINM 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 GRINM Semiconductor Materials are associated (or correlated) with Tongling Nonferrous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongling Nonferrous has no effect on the direction of GRINM Semiconductor i.e., GRINM Semiconductor and Tongling Nonferrous go up and down completely randomly.

Pair Corralation between GRINM Semiconductor and Tongling Nonferrous

Assuming the 90 days trading horizon GRINM Semiconductor Materials is expected to under-perform the Tongling Nonferrous. In addition to that, GRINM Semiconductor is 1.64 times more volatile than Tongling Nonferrous Metals. It trades about -0.05 of its total potential returns per unit of risk. Tongling Nonferrous Metals is currently generating about -0.07 per unit of volatility. If you would invest  351.00  in Tongling Nonferrous Metals on October 11, 2024 and sell it today you would lose (29.00) from holding Tongling Nonferrous Metals or give up 8.26% of portfolio value over 90 days.

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

GRINM Semiconductor Materials  vs.  Tongling Nonferrous Metals

GRINM Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GRINM Semiconductor Materials 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.

Tongling Nonferrous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tongling Nonferrous Metals 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.

Pair Trading with GRINM Semiconductor and Tongling Nonferrous

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

The idea behind GRINM Semiconductor Materials and Tongling Nonferrous Metals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.