Correlation Between Diodes Incorporated and Smart Global
Can any of the company-specific risk be diversified away by investing in both Diodes Incorporated and Smart Global 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 Diodes Incorporated and Smart Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diodes Incorporated and Smart Global Holdings, you can compare the effects of market volatilities on Diodes Incorporated and Smart Global 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 Diodes Incorporated with a short position of Smart Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diodes Incorporated and Smart Global.
Diversification Opportunities for Diodes Incorporated and Smart Global
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Diodes and Smart is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Diodes Incorporated and Smart Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Global Holdings and Diodes Incorporated 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 Diodes Incorporated are associated (or correlated) with Smart Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Global Holdings has no effect on the direction of Diodes Incorporated i.e., Diodes Incorporated and Smart Global go up and down completely randomly.
Pair Corralation between Diodes Incorporated and Smart Global
Given the investment horizon of 90 days Diodes Incorporated is expected to under-perform the Smart Global. But the stock apears to be less risky and, when comparing its historical volatility, Diodes Incorporated is 1.35 times less risky than Smart Global. The stock trades about 0.0 of its potential returns per unit of risk. The Smart Global Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,648 in Smart Global Holdings on August 27, 2024 and sell it today you would earn a total of 393.00 from holding Smart Global Holdings or generate 23.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 88.71% |
| Values | Daily Returns |
Diodes Incorporated vs. Smart Global Holdings
Performance |
| Timeline |
| Diodes Incorporated |
| Smart Global Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Diodes Incorporated and Smart Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diodes Incorporated and Smart Global
The main advantage of trading using opposite Diodes Incorporated and Smart Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diodes Incorporated position performs unexpectedly, Smart Global 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 Smart Global will offset losses from the drop in Smart Global's long position.The idea behind Diodes Incorporated and Smart Global Holdings 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.| Smart Global vs. Silicon Motion Technology | Smart Global vs. MACOM Technology Solutions | Smart Global vs. Semtech | Smart Global vs. Alpha and Omega |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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