Correlation Between Power Integrations and Semtech

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

Diversification Opportunities for Power Integrations and Semtech

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Power and Semtech is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Power Integrations and Semtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semtech and Power Integrations 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 Power Integrations 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 Power Integrations i.e., Power Integrations and Semtech go up and down completely randomly.

Pair Corralation between Power Integrations and Semtech

Given the investment horizon of 90 days Power Integrations is expected to generate 0.21 times more return on investment than Semtech. However, Power Integrations is 4.75 times less risky than Semtech. It trades about -0.1 of its potential returns per unit of risk. Semtech is currently generating about -0.3 per unit of risk. If you would invest  6,222  in Power Integrations on November 18, 2024 and sell it today you would lose (264.00) from holding Power Integrations or give up 4.24% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Power Integrations  vs.  Semtech

 Performance 
       Timeline  
Power Integrations 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Power Integrations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Power Integrations is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
Semtech 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Semtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Semtech is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Power Integrations and Semtech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Power Integrations and Semtech

The main advantage of trading using opposite Power Integrations and Semtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Integrations 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 Power Integrations 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.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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