Correlation Between Focus Media and Semiconductor Manufacturing

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

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

Diversification Opportunities for Focus Media and Semiconductor Manufacturing

0.94

Correlation Coefficient

Focus Media  Semiconductor Manufacturing

Almost no diversification

The 3 months correlation between Focus and Semiconductor is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Focus Media Information and Semiconductor Manufacturing In in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Manufacturing and Focus Media 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 Focus Media Information 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 Focus Media i.e., Focus Media and Semiconductor Manufacturing go up and down completely randomly.

Pair Corralation between Focus Media and Semiconductor Manufacturing

Assuming the 90 days trading horizon Focus Media is expected to generate 3.01 times less return on investment than Semiconductor Manufacturing. But when comparing it to its historical volatility, Focus Media Information is 2.3 times less risky than Semiconductor Manufacturing. It trades about 0.16 of its potential returns per unit of risk. Semiconductor Manufacturing Intl is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  4,678  in Semiconductor Manufacturing Intl on September 2, 2024 and sell it today you would earn a total of  4,332  from holding Semiconductor Manufacturing Intl or generate 92.6% return on investment over 90 days.

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

Focus Media Information  vs.  Semiconductor Manufacturing In

Focus Media Information

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Media Information are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Focus Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Semiconductor Manufacturing

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing Intl are ranked lower than 16 (%) 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 Focus Media and Semiconductor Manufacturing

The main advantage of trading using opposite Focus Media and Semiconductor Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focus Media 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 Focus Media Information and Semiconductor Manufacturing Intl 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.