Correlation Between NBTM New and Thinkon Semiconductor

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

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

Diversification Opportunities for NBTM New and Thinkon Semiconductor

0.51

Correlation Coefficient

NBTM New  Thinkon Semiconductor

Very weak diversification

The 3 months correlation between NBTM and Thinkon is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding NBTM New Materials and Thinkon Semiconductor Jinzhou in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thinkon Semiconductor and NBTM 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 NBTM New Materials are associated (or correlated) with Thinkon Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thinkon Semiconductor has no effect on the direction of NBTM New i.e., NBTM New and Thinkon Semiconductor go up and down completely randomly.

Pair Corralation between NBTM New and Thinkon Semiconductor

Assuming the 90 days trading horizon NBTM New is expected to generate 3.05 times less return on investment than Thinkon Semiconductor. But when comparing it to its historical volatility, NBTM New Materials is 1.39 times less risky than Thinkon Semiconductor. It trades about 0.04 of its potential returns per unit of risk. Thinkon Semiconductor Jinzhou is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,025  in Thinkon Semiconductor Jinzhou on September 29, 2024 and sell it today you would earn a total of  442.00  from holding Thinkon Semiconductor Jinzhou or generate 21.83% return on investment over 90 days.

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

NBTM New Materials  vs.  Thinkon Semiconductor Jinzhou

NBTM New Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NBTM New Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NBTM New may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Thinkon Semiconductor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thinkon Semiconductor Jinzhou are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Thinkon Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NBTM New and Thinkon Semiconductor

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

The idea behind NBTM New Materials and Thinkon Semiconductor Jinzhou 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..