Correlation Between Veeco Instruments and Monolithic Power
Can any of the company-specific risk be diversified away by investing in both Veeco Instruments and Monolithic Power 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 Veeco Instruments and Monolithic Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Veeco Instruments and Monolithic Power Systems, you can compare the effects of market volatilities on Veeco Instruments and Monolithic Power 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 Veeco Instruments with a short position of Monolithic Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veeco Instruments and Monolithic Power.
Diversification Opportunities for Veeco Instruments and Monolithic Power
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Veeco and Monolithic is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Veeco Instruments and Monolithic Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monolithic Power Systems and Veeco Instruments 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 Veeco Instruments are associated (or correlated) with Monolithic Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monolithic Power Systems has no effect on the direction of Veeco Instruments i.e., Veeco Instruments and Monolithic Power go up and down completely randomly.
Pair Corralation between Veeco Instruments and Monolithic Power
Given the investment horizon of 90 days Veeco Instruments is expected to generate 0.38 times more return on investment than Monolithic Power. However, Veeco Instruments is 2.65 times less risky than Monolithic Power. It trades about -0.09 of its potential returns per unit of risk. Monolithic Power Systems is currently generating about -0.31 per unit of risk. If you would invest 2,924 in Veeco Instruments on August 28, 2024 and sell it today you would lose (127.00) from holding Veeco Instruments or give up 4.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Veeco Instruments vs. Monolithic Power Systems
Performance |
| Timeline |
| Veeco Instruments |
| Monolithic Power Systems |
Veeco Instruments and Monolithic Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Veeco Instruments and Monolithic Power
The main advantage of trading using opposite Veeco Instruments and Monolithic Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Veeco Instruments position performs unexpectedly, Monolithic Power 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 Monolithic Power will offset losses from the drop in Monolithic Power's long position.The idea behind Veeco Instruments and Monolithic Power Systems 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.| Monolithic Power vs. Texas Instruments Incorporated | Monolithic Power vs. Microchip Technology | Monolithic Power vs. NXP Semiconductors NV | Monolithic Power vs. ON Semiconductor |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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