Correlation Between Analog Devices and RMG Acquisition

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

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

Diversification Opportunities for Analog Devices and RMG Acquisition

0.53

Correlation Coefficient

Analog Devices  RMG Acquisition

Very weak diversification

The 3 months correlation between Analog and RMG is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and RMG Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMG Acquisition Corp 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 RMG Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMG Acquisition Corp has no effect on the direction of Analog Devices i.e., Analog Devices and RMG Acquisition go up and down completely randomly.

Pair Corralation between Analog Devices and RMG Acquisition

If you would invest  20,548  in Analog Devices on September 16, 2024 and sell it today you would earn a total of  1,113  from holding Analog Devices or generate 5.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Analog Devices  vs.  RMG Acquisition Corp

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

RMG Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RMG Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, RMG Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Analog Devices and RMG Acquisition

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

The idea behind Analog Devices and RMG Acquisition Corp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.