Correlation Between Photronics and Diodes Incorporated

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Can any of the company-specific risk be diversified away by investing in both Photronics and Diodes Incorporated 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 Photronics and Diodes Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Photronics and Diodes Incorporated, you can compare the effects of market volatilities on Photronics and Diodes Incorporated 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 Photronics with a short position of Diodes Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Photronics and Diodes Incorporated.

Diversification Opportunities for Photronics and Diodes Incorporated

PhotronicsDiodesDiversified AwayPhotronicsDiodesDiversified Away100%
0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Photronics and Diodes is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Photronics and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated and Photronics 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 Photronics are associated (or correlated) with Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of Photronics i.e., Photronics and Diodes Incorporated go up and down completely randomly.

Pair Corralation between Photronics and Diodes Incorporated

Given the investment horizon of 90 days Photronics is expected to generate 0.56 times more return on investment than Diodes Incorporated. However, Photronics is 1.79 times less risky than Diodes Incorporated. It trades about -0.26 of its potential returns per unit of risk. Diodes Incorporated is currently generating about -0.34 per unit of risk. If you would invest  2,410  in Photronics on November 21, 2024 and sell it today you would lose (165.00) from holding Photronics or give up 6.85% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Photronics  vs.  Diodes Incorporated

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50510
JavaScript chart by amCharts 3.21.15PLAB DIOD
       Timeline  
Photronics 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Photronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2224262830
Diodes Incorporated 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Diodes Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb50556065

Photronics and Diodes Incorporated Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.96-2.96-1.97-0.980.00.911.832.753.67 0.0450.0500.0550.0600.0650.070
JavaScript chart by amCharts 3.21.15PLAB DIOD
       Returns  

Pair Trading with Photronics and Diodes Incorporated

The main advantage of trading using opposite Photronics and Diodes Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Photronics position performs unexpectedly, Diodes Incorporated 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 Diodes Incorporated will offset losses from the drop in Diodes Incorporated's long position.
The idea behind Photronics and Diodes Incorporated 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.
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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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