Correlation Between Analog Devices and MSP Recovery

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

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

Diversification Opportunities for Analog Devices and MSP Recovery

-0.69

Correlation Coefficient

Analog Devices  MSP Recovery

Excellent diversification

The 3 months correlation between Analog and MSP is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery 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 MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of Analog Devices i.e., Analog Devices and MSP Recovery go up and down completely randomly.

Pair Corralation between Analog Devices and MSP Recovery

Considering the 90-day investment horizon Analog Devices is expected to generate 52.37 times less return on investment than MSP Recovery. But when comparing it to its historical volatility, Analog Devices is 36.34 times less risky than MSP Recovery. It trades about 0.04 of its potential returns per unit of risk. MSP Recovery is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,950  in MSP Recovery on October 24, 2024 and sell it today you would lose (2,734) from holding MSP Recovery or give up 92.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Analog Devices  vs.  MSP Recovery

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.

MSP Recovery

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MSP Recovery are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, MSP Recovery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and MSP Recovery

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

The idea behind Analog Devices and MSP Recovery 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.