Correlation Between Semiconductor Manufacturing and Shenyang Chemical

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

By analyzing existing cross correlation between Semiconductor Manufacturing Intl and Shenyang Chemical Industry, you can compare the effects of market volatilities on Semiconductor Manufacturing and Shenyang Chemical 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 Shenyang Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semiconductor Manufacturing and Shenyang Chemical.

Diversification Opportunities for Semiconductor Manufacturing and Shenyang Chemical

-0.42

Correlation Coefficient

Semiconductor Manufacturing  Shenyang Chemical

Very good diversification

The 3 months correlation between Semiconductor and Shenyang is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Manufacturing In and Shenyang Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenyang Chemical 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 Intl are associated (or correlated) with Shenyang Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenyang Chemical has no effect on the direction of Semiconductor Manufacturing i.e., Semiconductor Manufacturing and Shenyang Chemical go up and down completely randomly.

Pair Corralation between Semiconductor Manufacturing and Shenyang Chemical

Assuming the 90 days trading horizon Semiconductor Manufacturing Intl is expected to under-perform the Shenyang Chemical. In addition to that, Semiconductor Manufacturing is 1.38 times more volatile than Shenyang Chemical Industry. It trades about -0.03 of its total potential returns per unit of risk. Shenyang Chemical Industry is currently generating about 0.09 per unit of volatility. If you would invest  339.00  in Shenyang Chemical Industry on December 28, 2024 and sell it today you would earn a total of  34.00  from holding Shenyang Chemical Industry or generate 10.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Semiconductor Manufacturing In  vs.  Shenyang Chemical Industry

Semiconductor Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semiconductor Manufacturing Intl 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.

Shenyang Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Chemical Industry are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Chemical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Semiconductor Manufacturing and Shenyang Chemical

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

The idea behind Semiconductor Manufacturing Intl and Shenyang Chemical Industry 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.