Correlation Between Kangxin New and Semiconductor Manufacturing

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

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

Diversification Opportunities for Kangxin New and Semiconductor Manufacturing

0.95

Correlation Coefficient

Kangxin New  Semiconductor Manufacturing

Almost no diversification

The 3 months correlation between Kangxin and Semiconductor is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Kangxin New Materials and Semiconductor Manufacturing El in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Manufacturing and Kangxin New 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 Kangxin New Materials 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 Kangxin New i.e., Kangxin New and Semiconductor Manufacturing go up and down completely randomly.

Pair Corralation between Kangxin New and Semiconductor Manufacturing

Assuming the 90 days trading horizon Kangxin New Materials is expected to generate 1.13 times more return on investment than Semiconductor Manufacturing. However, Kangxin New is 1.13 times more volatile than Semiconductor Manufacturing Electronics. It trades about 0.32 of its potential returns per unit of risk. Semiconductor Manufacturing Electronics is currently generating about 0.26 per unit of risk. If you would invest  207.00  in Kangxin New Materials on September 5, 2024 and sell it today you would earn a total of  65.00  from holding Kangxin New Materials or generate 31.4% return on investment over 90 days.

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

Kangxin New Materials  vs.  Semiconductor Manufacturing El

Kangxin New Materials

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kangxin New Materials are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kangxin New 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 Kangxin New and Semiconductor Manufacturing

The main advantage of trading using opposite Kangxin New and Semiconductor Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kangxin New 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 Kangxin New Materials 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 Transaction History module to view history of all your transactions and understand their impact on performance.