Correlation Between Analog Devices and Infineon Technologies

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

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

Diversification Opportunities for Analog Devices and Infineon Technologies

-0.63

Correlation Coefficient

Analog Devices  Infineon Technologies

Excellent diversification

The 3 months correlation between Analog and Infineon is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Infineon Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infineon Technologies 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 Infineon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infineon Technologies has no effect on the direction of Analog Devices i.e., Analog Devices and Infineon Technologies go up and down completely randomly.

Pair Corralation between Analog Devices and Infineon Technologies

If you would invest  18,690  in Analog Devices on October 5, 2024 and sell it today you would earn a total of  2,445  from holding Analog Devices or generate 13.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.37%
Values	Daily Returns

Analog Devices  vs.  Infineon Technologies AG

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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Infineon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Analog Devices and Infineon Technologies

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

The idea behind Analog Devices and Infineon Technologies AG 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.