Correlation Between Aba Chemicals and Semiconductor Manufacturing

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

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

Diversification Opportunities for Aba Chemicals and Semiconductor Manufacturing

0.85

Correlation Coefficient

Aba Chemicals  Semiconductor Manufacturing

Very poor diversification

The 3 months correlation between Aba and Semiconductor is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Aba Chemicals Corp and Semiconductor Manufacturing El in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Manufacturing and Aba Chemicals 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 Aba Chemicals Corp 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 Aba Chemicals i.e., Aba Chemicals and Semiconductor Manufacturing go up and down completely randomly.

Pair Corralation between Aba Chemicals and Semiconductor Manufacturing

Assuming the 90 days trading horizon Aba Chemicals is expected to generate 1.16 times less return on investment than Semiconductor Manufacturing. In addition to that, Aba Chemicals is 1.34 times more volatile than Semiconductor Manufacturing Electronics. It trades about 0.16 of its total potential returns per unit of risk. Semiconductor Manufacturing Electronics is currently generating about 0.25 per unit of volatility. If you would invest  338.00  in Semiconductor Manufacturing Electronics on September 12, 2024 and sell it today you would earn a total of  254.00  from holding Semiconductor Manufacturing Electronics or generate 75.15% return on investment over 90 days.

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

Aba Chemicals Corp  vs.  Semiconductor Manufacturing El

Aba Chemicals Corp

Risk-Adjusted Performance

12 of 100

Good

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

Semiconductor Manufacturing

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing Electronics are ranked lower than 19 (%) 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 Aba Chemicals and Semiconductor Manufacturing

The main advantage of trading using opposite Aba Chemicals and Semiconductor Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aba Chemicals 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 Aba Chemicals Corp 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.