Correlation Between Union Semiconductor and Chengdu Xinzhu

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

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

Diversification Opportunities for Union Semiconductor and Chengdu Xinzhu

0.74

Correlation Coefficient

Union Semiconductor  Chengdu Xinzhu

Poor diversification

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

Pair Corralation between Union Semiconductor and Chengdu Xinzhu

Assuming the 90 days trading horizon Union Semiconductor Co is expected to generate 1.11 times more return on investment than Chengdu Xinzhu. However, Union Semiconductor is 1.11 times more volatile than Chengdu Xinzhu RoadBridge. It trades about 0.17 of its potential returns per unit of risk. Chengdu Xinzhu RoadBridge is currently generating about 0.19 per unit of risk. If you would invest  645.00  in Union Semiconductor Co on September 14, 2024 and sell it today you would earn a total of  297.00  from holding Union Semiconductor Co or generate 46.05% return on investment over 90 days.

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

Union Semiconductor Co  vs.  Chengdu Xinzhu RoadBridge

Union Semiconductor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Union Semiconductor Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Union Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Chengdu Xinzhu RoadBridge

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Xinzhu RoadBridge are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu Xinzhu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Union Semiconductor and Chengdu Xinzhu

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

The idea behind Union Semiconductor Co and Chengdu Xinzhu RoadBridge 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.