Correlation Between Semiconductor Manufacturing and Guangdong Jinma

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

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

Diversification Opportunities for Semiconductor Manufacturing and Guangdong Jinma

0.87

Correlation Coefficient

Semiconductor Manufacturing  Guangdong Jinma

Very poor diversification

The 3 months correlation between Semiconductor and Guangdong is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Manufacturing In and Guangdong Jinma Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Jinma Ente and Semiconductor Manufacturing 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 Semiconductor Manufacturing Intl are associated (or correlated) with Guangdong Jinma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Jinma Ente has no effect on the direction of Semiconductor Manufacturing i.e., Semiconductor Manufacturing and Guangdong Jinma go up and down completely randomly.

Pair Corralation between Semiconductor Manufacturing and Guangdong Jinma

Assuming the 90 days trading horizon Semiconductor Manufacturing Intl is expected to generate 1.4 times more return on investment than Guangdong Jinma. However, Semiconductor Manufacturing is 1.4 times more volatile than Guangdong Jinma Entertainment. It trades about 0.21 of its potential returns per unit of risk. Guangdong Jinma Entertainment is currently generating about 0.16 per unit of risk. If you would invest  4,597  in Semiconductor Manufacturing Intl on September 5, 2024 and sell it today you would earn a total of  4,126  from holding Semiconductor Manufacturing Intl or generate 89.75% return on investment over 90 days.

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

Semiconductor Manufacturing In  vs.  Guangdong Jinma Entertainment

Semiconductor Manufacturing

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing Intl are ranked lower than 16 (%) 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.

Guangdong Jinma Ente

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jinma Entertainment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jinma sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Semiconductor Manufacturing and Guangdong Jinma

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

The idea behind Semiconductor Manufacturing Intl and Guangdong Jinma Entertainment 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.