Correlation Between Semiconductor Manufacturing and Huaxia Fund

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

Diversification Opportunities for Semiconductor Manufacturing and Huaxia Fund

0.03

Correlation Coefficient

Semiconductor Manufacturing  Huaxia Fund

Significant diversification

The 3 months correlation between Semiconductor and Huaxia is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Manufacturing In and Huaxia Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Fund Management 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 Huaxia Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Fund Management has no effect on the direction of Semiconductor Manufacturing i.e., Semiconductor Manufacturing and Huaxia Fund go up and down completely randomly.

Pair Corralation between Semiconductor Manufacturing and Huaxia Fund

Assuming the 90 days trading horizon Semiconductor Manufacturing Intl is expected to generate 3.64 times more return on investment than Huaxia Fund. However, Semiconductor Manufacturing is 3.64 times more volatile than Huaxia Fund Management. It trades about 0.08 of its potential returns per unit of risk. Huaxia Fund Management is currently generating about 0.2 per unit of risk. If you would invest  7,502  in Semiconductor Manufacturing Intl on October 10, 2024 and sell it today you would earn a total of  1,380  from holding Semiconductor Manufacturing Intl or generate 18.4% return on investment over 90 days.

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

Semiconductor Manufacturing In  vs.  Huaxia Fund Management

Semiconductor Manufacturing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing Intl are ranked lower than 6 (%) 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.

Huaxia Fund Management

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Fund Management are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Semiconductor Manufacturing and Huaxia Fund

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

The idea behind Semiconductor Manufacturing Intl and Huaxia Fund Management 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.