Correlation Between Orient Semiconductor and Microelectronics
Can any of the company-specific risk be diversified away by investing in both Orient Semiconductor and Microelectronics 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 Orient Semiconductor and Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orient Semiconductor Electronics and Microelectronics Technology, you can compare the effects of market volatilities on Orient Semiconductor and Microelectronics 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 Orient Semiconductor with a short position of Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orient Semiconductor and Microelectronics.
Diversification Opportunities for Orient Semiconductor and Microelectronics
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Orient and Microelectronics is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Orient Semiconductor Electroni and Microelectronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microelectronics Tec and Orient 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 Orient Semiconductor Electronics are associated (or correlated) with Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microelectronics Tec has no effect on the direction of Orient Semiconductor i.e., Orient Semiconductor and Microelectronics go up and down completely randomly.
Pair Corralation between Orient Semiconductor and Microelectronics
Assuming the 90 days trading horizon Orient Semiconductor Electronics is expected to under-perform the Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Orient Semiconductor Electronics is 1.42 times less risky than Microelectronics. The stock trades about -0.17 of its potential returns per unit of risk. The Microelectronics Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,920 in Microelectronics Technology on September 2, 2024 and sell it today you would earn a total of 210.00 from holding Microelectronics Technology or generate 7.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orient Semiconductor Electroni vs. Microelectronics Technology
Performance |
| Timeline |
| Orient Semiconductor |
| Microelectronics Tec |
Orient Semiconductor and Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orient Semiconductor and Microelectronics
The main advantage of trading using opposite Orient Semiconductor and Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orient Semiconductor position performs unexpectedly, Microelectronics 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 Microelectronics will offset losses from the drop in Microelectronics' long position.The idea behind Orient Semiconductor Electronics and Microelectronics Technology 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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