Correlation Between Shanghai CEO and StarPower Semiconductor

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Can any of the company-specific risk be diversified away by investing in both Shanghai CEO and StarPower Semiconductor 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 Shanghai CEO and StarPower Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai CEO Environmental and StarPower Semiconductor, you can compare the effects of market volatilities on Shanghai CEO and StarPower Semiconductor 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 Shanghai CEO with a short position of StarPower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai CEO and StarPower Semiconductor.

Diversification Opportunities for Shanghai CEO and StarPower Semiconductor

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Shanghai and StarPower is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai CEO Environmental and StarPower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StarPower Semiconductor and Shanghai CEO 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 Shanghai CEO Environmental are associated (or correlated) with StarPower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StarPower Semiconductor has no effect on the direction of Shanghai CEO i.e., Shanghai CEO and StarPower Semiconductor go up and down completely randomly.

Pair Corralation between Shanghai CEO and StarPower Semiconductor

Assuming the 90 days trading horizon Shanghai CEO Environmental is expected to generate 1.39 times more return on investment than StarPower Semiconductor. However, Shanghai CEO is 1.39 times more volatile than StarPower Semiconductor. It trades about -0.15 of its potential returns per unit of risk. StarPower Semiconductor is currently generating about -0.24 per unit of risk. If you would invest  1,010  in Shanghai CEO Environmental on October 30, 2024 and sell it today you would lose (147.00) from holding Shanghai CEO Environmental or give up 14.55% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Shanghai CEO Environmental  vs.  StarPower Semiconductor

 Performance 
       Timeline  
Shanghai CEO Environ 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shanghai CEO Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
StarPower Semiconductor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days StarPower Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shanghai CEO and StarPower Semiconductor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shanghai CEO and StarPower Semiconductor

The main advantage of trading using opposite Shanghai CEO and StarPower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai CEO position performs unexpectedly, StarPower Semiconductor 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 StarPower Semiconductor will offset losses from the drop in StarPower Semiconductor's long position.
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The idea behind Shanghai CEO Environmental and StarPower Semiconductor 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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