Correlation Between Minmetals Capital and Nexchip Semiconductor

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Can any of the company-specific risk be diversified away by investing in both Minmetals Capital and Nexchip 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 Minmetals Capital and Nexchip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Minmetals Capital Co and Nexchip Semiconductor Corp, you can compare the effects of market volatilities on Minmetals Capital and Nexchip 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 Minmetals Capital with a short position of Nexchip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Minmetals Capital and Nexchip Semiconductor.

Diversification Opportunities for Minmetals Capital and Nexchip Semiconductor

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Minmetals and Nexchip is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Minmetals Capital Co and Nexchip Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexchip Semiconductor and Minmetals Capital 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 Minmetals Capital Co are associated (or correlated) with Nexchip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexchip Semiconductor has no effect on the direction of Minmetals Capital i.e., Minmetals Capital and Nexchip Semiconductor go up and down completely randomly.

Pair Corralation between Minmetals Capital and Nexchip Semiconductor

Assuming the 90 days trading horizon Minmetals Capital is expected to generate 1.13 times less return on investment than Nexchip Semiconductor. But when comparing it to its historical volatility, Minmetals Capital Co is 1.0 times less risky than Nexchip Semiconductor. It trades about 0.24 of its potential returns per unit of risk. Nexchip Semiconductor Corp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,413  in Nexchip Semiconductor Corp on September 10, 2024 and sell it today you would earn a total of  1,436  from holding Nexchip Semiconductor Corp or generate 101.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Minmetals Capital Co  vs.  Nexchip Semiconductor Corp

 Performance 
       Timeline  
Minmetals Capital 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Minmetals Capital Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Minmetals Capital sustained solid returns over the last few months and may actually be approaching a breakup point.
Nexchip Semiconductor 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Nexchip Semiconductor Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nexchip Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Minmetals Capital and Nexchip Semiconductor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Minmetals Capital and Nexchip Semiconductor

The main advantage of trading using opposite Minmetals Capital and Nexchip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Minmetals Capital position performs unexpectedly, Nexchip 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 Nexchip Semiconductor will offset losses from the drop in Nexchip Semiconductor's long position.
The idea behind Minmetals Capital Co and Nexchip Semiconductor Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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