Correlation Between GRINM Semiconductor and Guangzhou Fangbang

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

Diversification Opportunities for GRINM Semiconductor and Guangzhou Fangbang

0.81

Correlation Coefficient

GRINM Semiconductor  Guangzhou Fangbang

Very poor diversification

The 3 months correlation between GRINM and Guangzhou is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding GRINM Semiconductor Materials and Guangzhou Fangbang Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Fangbang 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 Guangzhou Fangbang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Fangbang has no effect on the direction of GRINM Semiconductor i.e., GRINM Semiconductor and Guangzhou Fangbang go up and down completely randomly.

Pair Corralation between GRINM Semiconductor and Guangzhou Fangbang

Assuming the 90 days trading horizon GRINM Semiconductor Materials is expected to generate 1.09 times more return on investment than Guangzhou Fangbang. However, GRINM Semiconductor is 1.09 times more volatile than Guangzhou Fangbang Electronics. It trades about 0.01 of its potential returns per unit of risk. Guangzhou Fangbang Electronics is currently generating about -0.03 per unit of risk. If you would invest  1,190  in GRINM Semiconductor Materials on December 25, 2024 and sell it today you would earn a total of  3.00  from holding GRINM Semiconductor Materials or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

GRINM Semiconductor Materials  vs.  Guangzhou Fangbang Electronics

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.

Guangzhou Fangbang

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GRINM Semiconductor and Guangzhou Fangbang

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

The idea behind GRINM Semiconductor Materials and Guangzhou Fangbang Electronics 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.