Correlation Between Southchip Semiconductor and GigaDevice SemiconductorBei

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

By analyzing existing cross correlation between Southchip Semiconductor Technology and GigaDevice SemiconductorBeiji, you can compare the effects of market volatilities on Southchip Semiconductor and GigaDevice SemiconductorBei 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 Southchip Semiconductor with a short position of GigaDevice SemiconductorBei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southchip Semiconductor and GigaDevice SemiconductorBei.

Diversification Opportunities for Southchip Semiconductor and GigaDevice SemiconductorBei

0.88

Correlation Coefficient

Southchip Semiconductor  GigaDevice SemiconductorBei

Very poor diversification

The 3 months correlation between Southchip and GigaDevice is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Southchip Semiconductor Techno and GigaDevice SemiconductorBeiji in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaDevice SemiconductorBei and Southchip Semiconductor 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 Southchip Semiconductor Technology are associated (or correlated) with GigaDevice SemiconductorBei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaDevice SemiconductorBei has no effect on the direction of Southchip Semiconductor i.e., Southchip Semiconductor and GigaDevice SemiconductorBei go up and down completely randomly.

Pair Corralation between Southchip Semiconductor and GigaDevice SemiconductorBei

Assuming the 90 days trading horizon Southchip Semiconductor Technology is expected to generate 1.39 times more return on investment than GigaDevice SemiconductorBei. However, Southchip Semiconductor is 1.39 times more volatile than GigaDevice SemiconductorBeiji. It trades about 0.17 of its potential returns per unit of risk. GigaDevice SemiconductorBeiji is currently generating about 0.13 per unit of risk. If you would invest  2,677  in Southchip Semiconductor Technology on September 12, 2024 and sell it today you would earn a total of  1,326  from holding Southchip Semiconductor Technology or generate 49.53% return on investment over 90 days.

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

Southchip Semiconductor Techno  vs.  GigaDevice SemiconductorBeiji

Southchip Semiconductor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southchip Semiconductor Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Southchip Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

GigaDevice SemiconductorBei

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GigaDevice SemiconductorBeiji are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GigaDevice SemiconductorBei sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southchip Semiconductor and GigaDevice SemiconductorBei

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

The idea behind Southchip Semiconductor Technology and GigaDevice SemiconductorBeiji 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.