Correlation Between Semiconductor Manufacturing and Bangyan Technology

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

Diversification Opportunities for Semiconductor Manufacturing and Bangyan Technology

0.74

Correlation Coefficient

Semiconductor Manufacturing  Bangyan Technology

Poor diversification

The 3 months correlation between Semiconductor and Bangyan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Manufacturing El and Bangyan Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangyan Technology 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 Bangyan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangyan Technology has no effect on the direction of Semiconductor Manufacturing i.e., Semiconductor Manufacturing and Bangyan Technology go up and down completely randomly.

Pair Corralation between Semiconductor Manufacturing and Bangyan Technology

Assuming the 90 days trading horizon Semiconductor Manufacturing Electronics is expected to under-perform the Bangyan Technology. But the stock apears to be less risky and, when comparing its historical volatility, Semiconductor Manufacturing Electronics is 1.37 times less risky than Bangyan Technology. The stock trades about -0.26 of its potential returns per unit of risk. The Bangyan Technology Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,768  in Bangyan Technology Co on October 26, 2024 and sell it today you would lose (69.00) from holding Bangyan Technology Co or give up 3.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Semiconductor Manufacturing El  vs.  Bangyan Technology Co

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.

Bangyan Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bangyan Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bangyan Technology 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 Bangyan Technology

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

The idea behind Semiconductor Manufacturing Electronics and Bangyan Technology Co 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.