Correlation Between Wolfspeed and Analog Devices
Can any of the company-specific risk be diversified away by investing in both Wolfspeed and Analog Devices 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 Wolfspeed and Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wolfspeed and Analog Devices, you can compare the effects of market volatilities on Wolfspeed and Analog Devices 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 Wolfspeed with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wolfspeed and Analog Devices.
Diversification Opportunities for Wolfspeed and Analog Devices
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wolfspeed and Analog is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Wolfspeed and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Wolfspeed 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 Wolfspeed are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Wolfspeed i.e., Wolfspeed and Analog Devices go up and down completely randomly.
Pair Corralation between Wolfspeed and Analog Devices
Given the investment horizon of 90 days Wolfspeed is expected to under-perform the Analog Devices. In addition to that, Wolfspeed is 3.63 times more volatile than Analog Devices. It trades about -0.05 of its total potential returns per unit of risk. Analog Devices is currently generating about 0.03 per unit of volatility. If you would invest 18,460 in Analog Devices on November 9, 2024 and sell it today you would earn a total of 2,323 from holding Analog Devices or generate 12.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wolfspeed vs. Analog Devices
Performance |
| Timeline |
| Wolfspeed |
| Analog Devices |
Wolfspeed and Analog Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wolfspeed and Analog Devices
The main advantage of trading using opposite Wolfspeed and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wolfspeed position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.| Wolfspeed vs. NXP Semiconductors NV | Wolfspeed vs. Analog Devices | Wolfspeed vs. Microchip Technology | Wolfspeed vs. Monolithic Power Systems |
| Analog Devices vs. NXP Semiconductors NV | Analog Devices vs. Qualcomm Incorporated | Analog Devices vs. Broadcom | Analog Devices vs. Microchip Technology |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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