Correlation Between Analog Devices and Datalex Plc

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

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

Diversification Opportunities for Analog Devices and Datalex Plc

0.33

Correlation Coefficient

Analog Devices  Datalex Plc

Weak diversification

The 3 months correlation between Analog and Datalex is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Datalex plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datalex plc 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 Datalex Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datalex plc has no effect on the direction of Analog Devices i.e., Analog Devices and Datalex Plc go up and down completely randomly.

Pair Corralation between Analog Devices and Datalex Plc

Considering the 90-day investment horizon Analog Devices is expected to generate 0.74 times more return on investment than Datalex Plc. However, Analog Devices is 1.36 times less risky than Datalex Plc. It trades about 0.04 of its potential returns per unit of risk. Datalex plc is currently generating about -0.12 per unit of risk. If you would invest  15,462  in Analog Devices on September 18, 2024 and sell it today you would earn a total of  5,839  from holding Analog Devices or generate 37.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	28.63%
Values	Daily Returns

Analog Devices  vs.  Datalex plc

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.

Datalex plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datalex plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Datalex Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Analog Devices and Datalex Plc

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

The idea behind Analog Devices and Datalex plc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.