Correlation Between Semiconductor Manufacturing and Chongqing Road

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

Diversification Opportunities for Semiconductor Manufacturing and Chongqing Road

0.83

Correlation Coefficient

Semiconductor Manufacturing  Chongqing Road

Very poor diversification

The 3 months correlation between Semiconductor and Chongqing is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Manufacturing El and Chongqing Road Bridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Road Bridge 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 Chongqing Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Road Bridge has no effect on the direction of Semiconductor Manufacturing i.e., Semiconductor Manufacturing and Chongqing Road go up and down completely randomly.

Pair Corralation between Semiconductor Manufacturing and Chongqing Road

Assuming the 90 days trading horizon Semiconductor Manufacturing Electronics is expected to under-perform the Chongqing Road. But the stock apears to be less risky and, when comparing its historical volatility, Semiconductor Manufacturing Electronics is 1.54 times less risky than Chongqing Road. The stock trades about -0.12 of its potential returns per unit of risk. The Chongqing Road Bridge is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  682.00  in Chongqing Road Bridge on December 2, 2024 and sell it today you would lose (94.00) from holding Chongqing Road Bridge or give up 13.78% of portfolio value over 90 days.

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

Semiconductor Manufacturing El  vs.  Chongqing Road Bridge

Semiconductor Manufacturing

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Chongqing Road Bridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chongqing Road Bridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Semiconductor Manufacturing and Chongqing Road

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

The idea behind Semiconductor Manufacturing Electronics and Chongqing Road Bridge 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.