Correlation Between SemiLEDS and Globalfoundries

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

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

Diversification Opportunities for SemiLEDS and Globalfoundries

0.26

Correlation Coefficient

SemiLEDS  Globalfoundries

Modest diversification

The 3 months correlation between SemiLEDS and Globalfoundries is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding SemiLEDS and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries and SemiLEDS 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 SemiLEDS are associated (or correlated) with Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of SemiLEDS i.e., SemiLEDS and Globalfoundries go up and down completely randomly.

Pair Corralation between SemiLEDS and Globalfoundries

Given the investment horizon of 90 days SemiLEDS is expected to generate 1.93 times more return on investment than Globalfoundries. However, SemiLEDS is 1.93 times more volatile than Globalfoundries. It trades about 0.02 of its potential returns per unit of risk. Globalfoundries is currently generating about 0.02 per unit of risk. If you would invest  132.00  in SemiLEDS on September 2, 2024 and sell it today you would lose (3.00) from holding SemiLEDS or give up 2.27% of portfolio value over 90 days.

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

SemiLEDS  vs.  Globalfoundries

SemiLEDS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SemiLEDS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, SemiLEDS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Globalfoundries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Globalfoundries is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SemiLEDS and Globalfoundries

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

The idea behind SemiLEDS and Globalfoundries 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.