Correlation Between Semiconductor Manufacturing and China International

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

Diversification Opportunities for Semiconductor Manufacturing and China International

0.6

Correlation Coefficient

Semiconductor Manufacturing  China International

Poor diversification

The 3 months correlation between Semiconductor and China is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Manufacturing El and China International Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China International 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 China International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China International has no effect on the direction of Semiconductor Manufacturing i.e., Semiconductor Manufacturing and China International go up and down completely randomly.

Pair Corralation between Semiconductor Manufacturing and China International

Assuming the 90 days trading horizon Semiconductor Manufacturing Electronics is expected to generate 1.29 times more return on investment than China International. However, Semiconductor Manufacturing is 1.29 times more volatile than China International Capital. It trades about 0.01 of its potential returns per unit of risk. China International Capital is currently generating about -0.09 per unit of risk. If you would invest  471.00  in Semiconductor Manufacturing Electronics on October 24, 2024 and sell it today you would lose (1.00) from holding Semiconductor Manufacturing Electronics or give up 0.21% of portfolio value over 90 days.

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

Semiconductor Manufacturing El  vs.  China International Capital

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.

China International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China International Capital 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 Semiconductor Manufacturing and China International

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

The idea behind Semiconductor Manufacturing Electronics and China International Capital 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.