Correlation Between Plexus Corp and Semtech

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

Diversification Opportunities for Plexus Corp and Semtech

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Plexus and Semtech is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Plexus Corp and Semtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semtech and Plexus Corp 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 Plexus Corp are associated (or correlated) with Semtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semtech has no effect on the direction of Plexus Corp i.e., Plexus Corp and Semtech go up and down completely randomly.

Pair Corralation between Plexus Corp and Semtech

Given the investment horizon of 90 days Plexus Corp is expected to generate 2.94 times less return on investment than Semtech. But when comparing it to its historical volatility, Plexus Corp is 2.06 times less risky than Semtech. It trades about 0.22 of its potential returns per unit of risk. Semtech is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  4,497  in Semtech on August 29, 2024 and sell it today you would earn a total of  1,923  from holding Semtech or generate 42.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Plexus Corp  vs.  Semtech

 Performance 
       Timeline  
Plexus Corp 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Plexus Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.
Semtech 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Semtech are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Semtech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Plexus Corp and Semtech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Plexus Corp and Semtech

The main advantage of trading using opposite Plexus Corp and Semtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plexus Corp position performs unexpectedly, Semtech 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 Semtech will offset losses from the drop in Semtech's long position.
The idea behind Plexus Corp and Semtech 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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