Correlation Between Analog Devices and Wolfspeed
Can any of the company-specific risk be diversified away by investing in both Analog Devices and Wolfspeed 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 Wolfspeed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and Wolfspeed, you can compare the effects of market volatilities on Analog Devices and Wolfspeed 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 Wolfspeed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Wolfspeed.
Diversification Opportunities for Analog Devices and Wolfspeed
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Analog and Wolfspeed is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Wolfspeed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolfspeed 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 Wolfspeed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolfspeed has no effect on the direction of Analog Devices i.e., Analog Devices and Wolfspeed go up and down completely randomly.
Pair Corralation between Analog Devices and Wolfspeed
Considering the 90-day investment horizon Analog Devices is expected to under-perform the Wolfspeed. But the stock apears to be less risky and, when comparing its historical volatility, Analog Devices is 3.16 times less risky than Wolfspeed. The stock trades about -0.05 of its potential returns per unit of risk. The Wolfspeed is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 628.00 in Wolfspeed on November 18, 2024 and sell it today you would lose (10.00) from holding Wolfspeed or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. Wolfspeed
Performance |
| Timeline |
| Analog Devices |
| Wolfspeed |
Analog Devices and Wolfspeed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and Wolfspeed
The main advantage of trading using opposite Analog Devices and Wolfspeed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices position performs unexpectedly, Wolfspeed 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 Wolfspeed will offset losses from the drop in Wolfspeed's long position.| Analog Devices vs. NXP Semiconductors NV | Analog Devices vs. Qualcomm Incorporated | Analog Devices vs. Broadcom | Analog Devices vs. Microchip Technology |
| Wolfspeed vs. NXP Semiconductors NV | Wolfspeed vs. Analog Devices | Wolfspeed vs. Microchip Technology | Wolfspeed vs. Monolithic Power Systems |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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