Correlation Between Semiconductor Manufacturing and Chongqing Changan
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By analyzing existing cross correlation between Semiconductor Manufacturing Electronics and Chongqing Changan Automobile, you can compare the effects of market volatilities on Semiconductor Manufacturing and Chongqing Changan 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 Chongqing Changan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semiconductor Manufacturing and Chongqing Changan.
Diversification Opportunities for Semiconductor Manufacturing and Chongqing Changan
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Semiconductor and Chongqing is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Manufacturing El and Chongqing Changan Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Changan 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 Electronics are associated (or correlated) with Chongqing Changan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Changan has no effect on the direction of Semiconductor Manufacturing i.e., Semiconductor Manufacturing and Chongqing Changan go up and down completely randomly.
Pair Corralation between Semiconductor Manufacturing and Chongqing Changan
Assuming the 90 days trading horizon Semiconductor Manufacturing is expected to generate 2.0 times less return on investment than Chongqing Changan. But when comparing it to its historical volatility, Semiconductor Manufacturing Electronics is 1.18 times less risky than Chongqing Changan. It trades about 0.01 of its potential returns per unit of risk. Chongqing Changan Automobile is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,272 in Chongqing Changan Automobile on September 4, 2024 and sell it today you would earn a total of 131.00 from holding Chongqing Changan Automobile or generate 10.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 80.5% |
| Values | Daily Returns |
Semiconductor Manufacturing El vs. Chongqing Changan Automobile
Performance |
| Timeline |
| Semiconductor Manufacturing |
| Chongqing Changan |
Semiconductor Manufacturing and Chongqing Changan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Semiconductor Manufacturing and Chongqing Changan
The main advantage of trading using opposite Semiconductor Manufacturing and Chongqing Changan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semiconductor Manufacturing position performs unexpectedly, Chongqing Changan 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 Chongqing Changan will offset losses from the drop in Chongqing Changan's long position.The idea behind Semiconductor Manufacturing Electronics and Chongqing Changan Automobile 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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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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