Correlation Between Analog Devices and Space Communication

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

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

Diversification Opportunities for Analog Devices and Space Communication

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Correlation Coefficient

Analog Devices  Space Communication

Pay attention - limited upside

The 3 months correlation between Analog and Space is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Space Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Space Communication 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 Space Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Space Communication has no effect on the direction of Analog Devices i.e., Analog Devices and Space Communication go up and down completely randomly.

Pair Corralation between Analog Devices and Space Communication

Considering the 90-day investment horizon Analog Devices is expected to generate 0.47 times more return on investment than Space Communication. However, Analog Devices is 2.14 times less risky than Space Communication. It trades about 0.05 of its potential returns per unit of risk. Space Communication is currently generating about -0.04 per unit of risk. If you would invest  15,933  in Analog Devices on October 11, 2024 and sell it today you would earn a total of  6,111  from holding Analog Devices or generate 38.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Analog Devices  vs.  Space Communication

Analog Devices

Risk-Adjusted Performance

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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.

Space Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Space Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Space Communication is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Analog Devices and Space Communication

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

The idea behind Analog Devices and Space Communication 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.