Correlation Between Analog Devices and Cirrus Logic
Can any of the company-specific risk be diversified away by investing in both Analog Devices and Cirrus Logic 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 Analog Devices and Cirrus Logic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and Cirrus Logic, you can compare the effects of market volatilities on Analog Devices and Cirrus Logic 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 Analog Devices with a short position of Cirrus Logic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Cirrus Logic.
Diversification Opportunities for Analog Devices and Cirrus Logic
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Analog and Cirrus is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Cirrus Logic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cirrus Logic and Analog Devices 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 Analog Devices are associated (or correlated) with Cirrus Logic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cirrus Logic has no effect on the direction of Analog Devices i.e., Analog Devices and Cirrus Logic go up and down completely randomly.
Pair Corralation between Analog Devices and Cirrus Logic
Considering the 90-day investment horizon Analog Devices is expected to generate 1.31 times less return on investment than Cirrus Logic. But when comparing it to its historical volatility, Analog Devices is 1.22 times less risky than Cirrus Logic. It trades about 0.04 of its potential returns per unit of risk. Cirrus Logic is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7,322 in Cirrus Logic on August 27, 2024 and sell it today you would earn a total of 3,160 from holding Cirrus Logic or generate 43.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. Cirrus Logic
Performance |
| Timeline |
| Analog Devices |
| Cirrus Logic |
Analog Devices and Cirrus Logic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and Cirrus Logic
The main advantage of trading using opposite Analog Devices and Cirrus Logic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices position performs unexpectedly, Cirrus Logic 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 Cirrus Logic will offset losses from the drop in Cirrus Logic's long position.The idea behind Analog Devices and Cirrus Logic 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.| Cirrus Logic vs. Skyworks Solutions | Cirrus Logic vs. Qorvo Inc | Cirrus Logic vs. Analog Devices | Cirrus Logic vs. Lattice Semiconductor |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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