Correlation Between Liaoning Chengda and StarPower Semiconductor

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

By analyzing existing cross correlation between Liaoning Chengda Biotechnology and StarPower Semiconductor, you can compare the effects of market volatilities on Liaoning Chengda and StarPower 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 Liaoning Chengda with a short position of StarPower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liaoning Chengda and StarPower Semiconductor.

Diversification Opportunities for Liaoning Chengda and StarPower Semiconductor

0.74

Correlation Coefficient

Liaoning Chengda  StarPower Semiconductor

Poor diversification

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

Pair Corralation between Liaoning Chengda and StarPower Semiconductor

Assuming the 90 days trading horizon Liaoning Chengda Biotechnology is expected to generate 0.86 times more return on investment than StarPower Semiconductor. However, Liaoning Chengda Biotechnology is 1.16 times less risky than StarPower Semiconductor. It trades about 0.03 of its potential returns per unit of risk. StarPower Semiconductor is currently generating about -0.09 per unit of risk. If you would invest  2,769  in Liaoning Chengda Biotechnology on December 2, 2024 and sell it today you would earn a total of  69.00  from holding Liaoning Chengda Biotechnology or generate 2.49% return on investment over 90 days.

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

Liaoning Chengda Biotechnology  vs.  StarPower Semiconductor

Liaoning Chengda Bio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liaoning Chengda Biotechnology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Liaoning Chengda is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

StarPower Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days StarPower Semiconductor 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 Liaoning Chengda and StarPower Semiconductor

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

The idea behind Liaoning Chengda Biotechnology and StarPower Semiconductor 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.