Correlation Between GRINM Semiconductor and China Merchants

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

Diversification Opportunities for GRINM Semiconductor and China Merchants

0.41

Correlation Coefficient

GRINM Semiconductor  China Merchants

Very weak diversification

The 3 months correlation between GRINM and China is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding GRINM Semiconductor Materials and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank 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 China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of GRINM Semiconductor i.e., GRINM Semiconductor and China Merchants go up and down completely randomly.

Pair Corralation between GRINM Semiconductor and China Merchants

Assuming the 90 days trading horizon GRINM Semiconductor is expected to generate 6.9 times less return on investment than China Merchants. In addition to that, GRINM Semiconductor is 2.45 times more volatile than China Merchants Bank. It trades about 0.01 of its total potential returns per unit of risk. China Merchants Bank is currently generating about 0.22 per unit of volatility. If you would invest  3,940  in China Merchants Bank on December 25, 2024 and sell it today you would earn a total of  565.00  from holding China Merchants Bank or generate 14.34% return on investment over 90 days.

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

GRINM Semiconductor Materials  vs.  China Merchants Bank

GRINM Semiconductor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GRINM Semiconductor Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GRINM Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Merchants Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Bank are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Merchants sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GRINM Semiconductor and China Merchants

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

The idea behind GRINM Semiconductor Materials and China Merchants Bank 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.