Correlation Between Powerchip Semiconductor and Chailease Holding

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

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

Diversification Opportunities for Powerchip Semiconductor and Chailease Holding

0.74

Correlation Coefficient

Powerchip Semiconductor  Chailease Holding

Poor diversification

The 3 months correlation between Powerchip and Chailease is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Powerchip Semiconductor Manufa and Chailease Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chailease Holding and Powerchip Semiconductor 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 Powerchip Semiconductor Manufacturing are associated (or correlated) with Chailease Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chailease Holding has no effect on the direction of Powerchip Semiconductor i.e., Powerchip Semiconductor and Chailease Holding go up and down completely randomly.

Pair Corralation between Powerchip Semiconductor and Chailease Holding

Assuming the 90 days trading horizon Powerchip Semiconductor Manufacturing is expected to under-perform the Chailease Holding. But the stock apears to be less risky and, when comparing its historical volatility, Powerchip Semiconductor Manufacturing is 1.35 times less risky than Chailease Holding. The stock trades about -0.16 of its potential returns per unit of risk. The Chailease Holding Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  14,150  in Chailease Holding Co on September 5, 2024 and sell it today you would lose (1,850) from holding Chailease Holding Co or give up 13.07% of portfolio value over 90 days.

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

Powerchip Semiconductor Manufa  vs.  Chailease Holding Co

Powerchip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Powerchip Semiconductor Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Chailease Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chailease Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Powerchip Semiconductor and Chailease Holding

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

The idea behind Powerchip Semiconductor Manufacturing and Chailease Holding 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.