Correlation Between Analog Devices and CVW CleanTech

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

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

Diversification Opportunities for Analog Devices and CVW CleanTech

-0.61

Correlation Coefficient

Analog Devices  CVW CleanTech

Excellent diversification

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

Pair Corralation between Analog Devices and CVW CleanTech

Considering the 90-day investment horizon Analog Devices is expected to generate 1.34 times less return on investment than CVW CleanTech. But when comparing it to its historical volatility, Analog Devices is 2.7 times less risky than CVW CleanTech. It trades about 0.03 of its potential returns per unit of risk. CVW CleanTech is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  62.00  in CVW CleanTech on December 18, 2024 and sell it today you would lose (4.00) from holding CVW CleanTech or give up 6.45% of portfolio value over 90 days.

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

Analog Devices  vs.  CVW CleanTech

Analog Devices

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

CVW CleanTech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, CVW CleanTech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Analog Devices and CVW CleanTech

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

The idea behind Analog Devices and CVW CleanTech 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.