Correlation Between Semtech and ZOETIS

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Can any of the company-specific risk be diversified away by investing in both Semtech and ZOETIS 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 ZOETIS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Semtech and ZOETIS INC 47, you can compare the effects of market volatilities on Semtech and ZOETIS 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 ZOETIS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semtech and ZOETIS.

Diversification Opportunities for Semtech and ZOETIS

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between Semtech and ZOETIS is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and ZOETIS INC 47 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZOETIS INC 47 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 ZOETIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZOETIS INC 47 has no effect on the direction of Semtech i.e., Semtech and ZOETIS go up and down completely randomly.

Pair Corralation between Semtech and ZOETIS

Given the investment horizon of 90 days Semtech is expected to generate 29.7 times less return on investment than ZOETIS. But when comparing it to its historical volatility, Semtech is 22.78 times less risky than ZOETIS. It trades about 0.06 of its potential returns per unit of risk. ZOETIS INC 47 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9,655  in ZOETIS INC 47 on September 4, 2024 and sell it today you would lose (629.00) from holding ZOETIS INC 47 or give up 6.51% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy81.62%
ValuesDaily Returns

Semtech  vs.  ZOETIS INC 47

 Performance 
       Timeline  
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.
ZOETIS INC 47 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ZOETIS INC 47 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ZOETIS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Semtech and ZOETIS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Semtech and ZOETIS

The main advantage of trading using opposite Semtech and ZOETIS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semtech position performs unexpectedly, ZOETIS 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 ZOETIS will offset losses from the drop in ZOETIS's long position.
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The idea behind Semtech and ZOETIS INC 47 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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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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