Correlation Between Semtech and The9

Can any of the company-specific risk be diversified away by investing in both Semtech and The9 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 Semtech and The9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Semtech and The9 Ltd ADR, you can compare the effects of market volatilities on Semtech and The9 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 Semtech with a short position of The9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semtech and The9.

Diversification Opportunities for Semtech and The9

0.8

Correlation Coefficient

Semtech  The9

Very poor diversification

The 3 months correlation between Semtech and The9 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and The9 Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The9 Ltd ADR and Semtech 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 Semtech are associated (or correlated) with The9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The9 Ltd ADR has no effect on the direction of Semtech i.e., Semtech and The9 go up and down completely randomly.

Pair Corralation between Semtech and The9

Given the investment horizon of 90 days Semtech is expected to generate 1.74 times less return on investment than The9. But when comparing it to its historical volatility, Semtech is 1.25 times less risky than The9. It trades about 0.19 of its potential returns per unit of risk. The9 Ltd ADR is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  690.00  in The9 Ltd ADR on September 3, 2024 and sell it today you would earn a total of  785.00  from holding The9 Ltd ADR or generate 113.77% return on investment over 90 days.

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

Semtech  vs.  The9 Ltd ADR

Semtech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Semtech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Semtech exhibited solid returns over the last few months and may actually be approaching a breakup point.

The9 Ltd ADR

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The9 Ltd ADR are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, The9 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Semtech and The9

The main advantage of trading using opposite Semtech and The9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semtech position performs unexpectedly, The9 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 The9 will offset losses from the drop in The9's long position.

The idea behind Semtech and The9 Ltd ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.