Correlation Between Analog Devices and 207597EG6

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Can any of the company-specific risk be diversified away by investing in both Analog Devices and 207597EG6 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 207597EG6 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and CONNECTICUT LT PWR, you can compare the effects of market volatilities on Analog Devices and 207597EG6 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 207597EG6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and 207597EG6.

Diversification Opportunities for Analog Devices and 207597EG6

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Analog and 207597EG6 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and CONNECTICUT LT PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONNECTICUT LT PWR 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 207597EG6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONNECTICUT LT PWR has no effect on the direction of Analog Devices i.e., Analog Devices and 207597EG6 go up and down completely randomly.

Pair Corralation between Analog Devices and 207597EG6

Considering the 90-day investment horizon Analog Devices is expected to under-perform the 207597EG6. In addition to that, Analog Devices is 1.02 times more volatile than CONNECTICUT LT PWR. It trades about -0.02 of its total potential returns per unit of risk. CONNECTICUT LT PWR is currently generating about 0.31 per unit of volatility. If you would invest  8,539  in CONNECTICUT LT PWR on September 12, 2024 and sell it today you would earn a total of  538.00  from holding CONNECTICUT LT PWR or generate 6.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy54.55%
ValuesDaily Returns

Analog Devices  vs.  CONNECTICUT LT PWR

 Performance 
       Timeline  
Analog Devices 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
CONNECTICUT LT PWR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CONNECTICUT LT PWR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 207597EG6 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Analog Devices and 207597EG6 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Analog Devices and 207597EG6

The main advantage of trading using opposite Analog Devices and 207597EG6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices position performs unexpectedly, 207597EG6 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 207597EG6 will offset losses from the drop in 207597EG6's long position.
The idea behind Analog Devices and CONNECTICUT LT PWR 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 the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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