Correlation Between Analog Devices and Acm Research

Can any of the company-specific risk be diversified away by investing in both Analog Devices and Acm Research 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 Analog Devices and Acm Research into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Analog Devices and Acm Research, you can compare the effects of market volatilities on Analog Devices and Acm Research 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 Analog Devices with a short position of Acm Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Acm Research.

Diversification Opportunities for Analog Devices and Acm Research

0.61

Correlation Coefficient

Analog Devices  Acm Research

Poor diversification

The 3 months correlation between Analog and Acm is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Acm Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acm Research and Analog Devices 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 Analog Devices are associated (or correlated) with Acm Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acm Research has no effect on the direction of Analog Devices i.e., Analog Devices and Acm Research go up and down completely randomly.

Pair Corralation between Analog Devices and Acm Research

Considering the 90-day investment horizon Analog Devices is expected to generate 0.35 times more return on investment than Acm Research. However, Analog Devices is 2.89 times less risky than Acm Research. It trades about -0.01 of its potential returns per unit of risk. Acm Research is currently generating about -0.23 per unit of risk. If you would invest  21,306  in Analog Devices on September 22, 2024 and sell it today you would lose (128.00) from holding Analog Devices or give up 0.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Analog Devices  vs.  Acm Research

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Acm Research

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acm Research has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Analog Devices and Acm Research

The main advantage of trading using opposite Analog Devices and Acm Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices position performs unexpectedly, Acm Research 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 Acm Research will offset losses from the drop in Acm Research's long position.

The idea behind Analog Devices and Acm Research 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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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.