Correlation Between Semtech and Supercom

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

Diversification Opportunities for Semtech and Supercom

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Semtech and Supercom is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and Supercom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supercom and Semtech 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 Semtech are associated (or correlated) with Supercom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supercom has no effect on the direction of Semtech i.e., Semtech and Supercom go up and down completely randomly.

Pair Corralation between Semtech and Supercom

Given the investment horizon of 90 days Semtech is expected to generate 0.94 times more return on investment than Supercom. However, Semtech is 1.06 times less risky than Supercom. It trades about -0.21 of its potential returns per unit of risk. Supercom is currently generating about -0.21 per unit of risk. If you would invest  5,733  in Semtech on November 28, 2024 and sell it today you would lose (2,051) from holding Semtech or give up 35.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Semtech  vs.  Supercom

 Performance 
       Timeline  
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 inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Supercom 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Supercom are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Supercom sustained solid returns over the last few months and may actually be approaching a breakup point.

Semtech and Supercom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Semtech and Supercom

The main advantage of trading using opposite Semtech and Supercom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semtech position performs unexpectedly, Supercom 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 Supercom will offset losses from the drop in Supercom's long position.
The idea behind Semtech and Supercom 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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