Correlation Between Semiconductor Manufacturing and Weihai Honglin

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

By analyzing existing cross correlation between Semiconductor Manufacturing Electronics and Weihai Honglin Electronic, you can compare the effects of market volatilities on Semiconductor Manufacturing and Weihai Honglin 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 Semiconductor Manufacturing with a short position of Weihai Honglin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semiconductor Manufacturing and Weihai Honglin.

Diversification Opportunities for Semiconductor Manufacturing and Weihai Honglin

0.67

Correlation Coefficient

Semiconductor Manufacturing  Weihai Honglin

Poor diversification

The 3 months correlation between Semiconductor and Weihai is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Manufacturing El and Weihai Honglin Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weihai Honglin Electronic and Semiconductor Manufacturing 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 Semiconductor Manufacturing Electronics are associated (or correlated) with Weihai Honglin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weihai Honglin Electronic has no effect on the direction of Semiconductor Manufacturing i.e., Semiconductor Manufacturing and Weihai Honglin go up and down completely randomly.

Pair Corralation between Semiconductor Manufacturing and Weihai Honglin

Assuming the 90 days trading horizon Semiconductor Manufacturing Electronics is expected to generate 1.09 times more return on investment than Weihai Honglin. However, Semiconductor Manufacturing is 1.09 times more volatile than Weihai Honglin Electronic. It trades about 0.01 of its potential returns per unit of risk. Weihai Honglin Electronic is currently generating about -0.01 per unit of risk. If you would invest  500.00  in Semiconductor Manufacturing Electronics on October 5, 2024 and sell it today you would lose (7.00) from holding Semiconductor Manufacturing Electronics or give up 1.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Semiconductor Manufacturing El  vs.  Weihai Honglin Electronic

Semiconductor Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Weihai Honglin Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Semiconductor Manufacturing and Weihai Honglin

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

The idea behind Semiconductor Manufacturing Electronics and Weihai Honglin Electronic 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.