Correlation Between Nepes and SFA Semicon

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

By analyzing existing cross correlation between Nepes and SFA Semicon Co, you can compare the effects of market volatilities on Nepes and SFA Semicon 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 Nepes with a short position of SFA Semicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nepes and SFA Semicon.

Diversification Opportunities for Nepes and SFA Semicon

0.9

Correlation Coefficient

Nepes  SFA Semicon

Almost no diversification

The 3 months correlation between Nepes and SFA is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Nepes and SFA Semicon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFA Semicon and Nepes 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 Nepes are associated (or correlated) with SFA Semicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFA Semicon has no effect on the direction of Nepes i.e., Nepes and SFA Semicon go up and down completely randomly.

Pair Corralation between Nepes and SFA Semicon

Assuming the 90 days trading horizon Nepes is expected to under-perform the SFA Semicon. In addition to that, Nepes is 1.24 times more volatile than SFA Semicon Co. It trades about -0.12 of its total potential returns per unit of risk. SFA Semicon Co is currently generating about -0.09 per unit of volatility. If you would invest  362,500  in SFA Semicon Co on September 13, 2024 and sell it today you would lose (50,000) from holding SFA Semicon Co or give up 13.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.31%
Values	Daily Returns

Nepes  vs.  SFA Semicon Co

Nepes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nepes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SFA Semicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFA Semicon Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nepes and SFA Semicon

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

The idea behind Nepes and SFA Semicon Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.