Correlation Between Semtech and United Fire
Can any of the company-specific risk be diversified away by investing in both Semtech and United Fire 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 United Fire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Semtech and United Fire Group, you can compare the effects of market volatilities on Semtech and United Fire 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 United Fire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semtech and United Fire.
Diversification Opportunities for Semtech and United Fire
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Semtech and United is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and United Fire Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Fire Group 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 United Fire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Fire Group has no effect on the direction of Semtech i.e., Semtech and United Fire go up and down completely randomly.
Pair Corralation between Semtech and United Fire
Given the investment horizon of 90 days Semtech is expected to generate 1.5 times more return on investment than United Fire. However, Semtech is 1.5 times more volatile than United Fire Group. It trades about 0.14 of its potential returns per unit of risk. United Fire Group is currently generating about 0.07 per unit of risk. If you would invest 2,062 in Semtech on September 4, 2024 and sell it today you would earn a total of 4,633 from holding Semtech or generate 224.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Semtech vs. United Fire Group
Performance |
| Timeline |
| Semtech |
| United Fire Group |
Semtech and United Fire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Semtech and United Fire
The main advantage of trading using opposite Semtech and United Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semtech position performs unexpectedly, United Fire 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 United Fire will offset losses from the drop in United Fire's long position.| Semtech vs. Power Integrations | Semtech vs. Diodes Incorporated | Semtech vs. MACOM Technology Solutions | Semtech vs. Cirrus Logic |
| United Fire vs. Donegal Group B | United Fire vs. Horace Mann Educators | United Fire vs. Donegal Group A | United Fire vs. Global Indemnity PLC |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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