Correlation Between Semiconductor Bear and COSCO SHIPPING

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Can any of the company-specific risk be diversified away by investing in both Semiconductor Bear and COSCO SHIPPING 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 Semiconductor Bear and COSCO SHIPPING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Semiconductor Bear 3X and COSCO SHIPPING HOLDINGS, you can compare the effects of market volatilities on Semiconductor Bear and COSCO SHIPPING 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 Bear with a short position of COSCO SHIPPING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semiconductor Bear and COSCO SHIPPING.

Diversification Opportunities for Semiconductor Bear and COSCO SHIPPING

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Semiconductor and COSCO is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Bear 3X and COSCO SHIPPING HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO SHIPPING HOLDINGS and Semiconductor Bear 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 Bear 3X are associated (or correlated) with COSCO SHIPPING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSCO SHIPPING HOLDINGS has no effect on the direction of Semiconductor Bear i.e., Semiconductor Bear and COSCO SHIPPING go up and down completely randomly.

Pair Corralation between Semiconductor Bear and COSCO SHIPPING

Given the investment horizon of 90 days Semiconductor Bear 3X is expected to under-perform the COSCO SHIPPING. In addition to that, Semiconductor Bear is 1.5 times more volatile than COSCO SHIPPING HOLDINGS. It trades about -0.02 of its total potential returns per unit of risk. COSCO SHIPPING HOLDINGS is currently generating about 0.08 per unit of volatility. If you would invest  464.00  in COSCO SHIPPING HOLDINGS on June 28, 2022 and sell it today you would earn a total of  733.00  from holding COSCO SHIPPING HOLDINGS or generate 157.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy78.47%
ValuesDaily Returns

Semiconductor Bear 3X  vs.  COSCO SHIPPING HOLDINGS

 Performance (%) 
       Timeline  
Semiconductor Bear 
Semiconductor Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Bear 3X are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Semiconductor Bear reported solid returns over the last few months and may actually be approaching a breakup point.

Semiconductor Price Channel

COSCO SHIPPING HOLDINGS 
COSCO Performance
0 of 100
Over the last 90 days COSCO SHIPPING HOLDINGS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

COSCO Price Channel

Semiconductor Bear and COSCO SHIPPING Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Semiconductor Bear and COSCO SHIPPING

The main advantage of trading using opposite Semiconductor Bear and COSCO SHIPPING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semiconductor Bear position performs unexpectedly, COSCO SHIPPING 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 COSCO SHIPPING will offset losses from the drop in COSCO SHIPPING's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Semiconductor Bear as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Semiconductor Bear's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Semiconductor Bear's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Semiconductor Bear 3X.
The idea behind Semiconductor Bear 3X and COSCO SHIPPING HOLDINGS 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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