Correlation Between Semiconductor Manufacturing and Yuanjie Semiconductor

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

Diversification Opportunities for Semiconductor Manufacturing and Yuanjie Semiconductor

0.8

Correlation Coefficient

Semiconductor Manufacturing  Yuanjie Semiconductor

Very poor diversification

The 3 months correlation between Semiconductor and Yuanjie is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Manufacturing El and Yuanjie Semiconductor Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanjie Semiconductor 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 Yuanjie Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanjie Semiconductor has no effect on the direction of Semiconductor Manufacturing i.e., Semiconductor Manufacturing and Yuanjie Semiconductor go up and down completely randomly.

Pair Corralation between Semiconductor Manufacturing and Yuanjie Semiconductor

Assuming the 90 days trading horizon Semiconductor Manufacturing is expected to generate 1.01 times less return on investment than Yuanjie Semiconductor. But when comparing it to its historical volatility, Semiconductor Manufacturing Electronics is 1.4 times less risky than Yuanjie Semiconductor. It trades about 0.25 of its potential returns per unit of risk. Yuanjie Semiconductor Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  8,639  in Yuanjie Semiconductor Technology on September 13, 2024 and sell it today you would earn a total of  5,821  from holding Yuanjie Semiconductor Technology or generate 67.38% return on investment over 90 days.

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

Semiconductor Manufacturing El  vs.  Yuanjie Semiconductor Technolo

Semiconductor Manufacturing

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing Electronics are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Semiconductor Manufacturing sustained solid returns over the last few months and may actually be approaching a breakup point.

Yuanjie Semiconductor

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanjie Semiconductor Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yuanjie Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Semiconductor Manufacturing and Yuanjie Semiconductor

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

The idea behind Semiconductor Manufacturing Electronics and Yuanjie Semiconductor Technology 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.