Correlation Between AXT and Power Integrations
Can any of the company-specific risk be diversified away by investing in both AXT and Power Integrations 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 AXT and Power Integrations into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AXT Inc and Power Integrations, you can compare the effects of market volatilities on AXT and Power Integrations 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 AXT with a short position of Power Integrations. Check out your portfolio center. Please also check ongoing floating volatility patterns of AXT and Power Integrations.
Diversification Opportunities for AXT and Power Integrations
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between AXT and Power is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding AXT Inc and Power Integrations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Integrations and AXT 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 AXT Inc are associated (or correlated) with Power Integrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Integrations has no effect on the direction of AXT i.e., AXT and Power Integrations go up and down completely randomly.
Pair Corralation between AXT and Power Integrations
Given the investment horizon of 90 days AXT Inc is expected to under-perform the Power Integrations. In addition to that, AXT is 2.06 times more volatile than Power Integrations. It trades about -0.22 of its total potential returns per unit of risk. Power Integrations is currently generating about 0.1 per unit of volatility. If you would invest 6,481 in Power Integrations on August 28, 2024 and sell it today you would earn a total of 324.00 from holding Power Integrations or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AXT Inc vs. Power Integrations
Performance |
| Timeline |
| AXT Inc |
| Power Integrations |
AXT and Power Integrations Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AXT and Power Integrations
The main advantage of trading using opposite AXT and Power Integrations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AXT position performs unexpectedly, Power Integrations 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 Power Integrations will offset losses from the drop in Power Integrations' long position.The idea behind AXT Inc and Power Integrations 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.| Power Integrations vs. Diodes Incorporated | Power Integrations vs. MACOM Technology Solutions | Power Integrations vs. Cirrus Logic | Power Integrations vs. Amkor Technology |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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