Correlation Between Semiconductor Bear and AERGO

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Can any of the company-specific risk be diversified away by investing in both Semiconductor Bear and AERGO 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 AERGO 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 AERGO, you can compare the effects of market volatilities on Semiconductor Bear and AERGO 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 AERGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semiconductor Bear and AERGO.

Diversification Opportunities for Semiconductor Bear and AERGO

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Semiconductor and AERGO is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Bear 3X and AERGO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AERGO 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 AERGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AERGO has no effect on the direction of Semiconductor Bear i.e., Semiconductor Bear and AERGO go up and down completely randomly.

Pair Corralation between Semiconductor Bear and AERGO

Given the investment horizon of 90 days Semiconductor Bear 3X is expected to generate 0.76 times more return on investment than AERGO. However, Semiconductor Bear 3X is 1.32 times less risky than AERGO. It trades about 0.19 of its potential returns per unit of risk. AERGO is currently generating about 0.04 per unit of risk. If you would invest  3,871  in Semiconductor Bear 3X on June 30, 2022 and sell it today you would earn a total of  2,254  from holding Semiconductor Bear 3X or generate 58.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy85.71%
ValuesDaily Returns

Semiconductor Bear 3X  vs.  AERGO

 Performance (%) 
       Timeline  
Semiconductor Bear 
Semiconductor Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Bear 3X are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Semiconductor Bear may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Semiconductor Price Channel

AERGO 
AERGO Performance
0 of 100
Over the last 90 days AERGO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak technical and fundamental indicators, AERGO sustained solid returns over the last few months and may actually be approaching a breakup point.

Semiconductor Bear and AERGO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Semiconductor Bear and AERGO

The main advantage of trading using opposite Semiconductor Bear and AERGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semiconductor Bear position performs unexpectedly, AERGO 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 AERGO will offset losses from the drop in AERGO'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 AERGO 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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