Correlation Between Shenwu Energy and Semiconductor Manufacturing

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

By analyzing existing cross correlation between Shenwu Energy Saving and Semiconductor Manufacturing Electronics, you can compare the effects of market volatilities on Shenwu Energy and Semiconductor Manufacturing 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 Shenwu Energy with a short position of Semiconductor Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenwu Energy and Semiconductor Manufacturing.

Diversification Opportunities for Shenwu Energy and Semiconductor Manufacturing

0.87

Correlation Coefficient

Shenwu Energy  Semiconductor Manufacturing

Very poor diversification

The 3 months correlation between Shenwu and Semiconductor is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shenwu Energy Saving and Semiconductor Manufacturing El in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Manufacturing and Shenwu Energy 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 Shenwu Energy Saving are associated (or correlated) with Semiconductor Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semiconductor Manufacturing has no effect on the direction of Shenwu Energy i.e., Shenwu Energy and Semiconductor Manufacturing go up and down completely randomly.

Pair Corralation between Shenwu Energy and Semiconductor Manufacturing

Assuming the 90 days trading horizon Shenwu Energy is expected to generate 1.17 times less return on investment than Semiconductor Manufacturing. But when comparing it to its historical volatility, Shenwu Energy Saving is 1.11 times less risky than Semiconductor Manufacturing. It trades about 0.21 of its potential returns per unit of risk. Semiconductor Manufacturing Electronics is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  354.00  in Semiconductor Manufacturing Electronics on September 4, 2024 and sell it today you would earn a total of  220.00  from holding Semiconductor Manufacturing Electronics or generate 62.15% return on investment over 90 days.

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

Shenwu Energy Saving  vs.  Semiconductor Manufacturing El

Shenwu Energy Saving

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenwu Energy Saving are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenwu Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Semiconductor Manufacturing

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing Electronics are ranked lower than 17 (%) 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.

Pair Trading with Shenwu Energy and Semiconductor Manufacturing

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

The idea behind Shenwu Energy Saving and Semiconductor Manufacturing Electronics 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.