Correlation Between Analog Devices and SUNation Energy

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

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

Diversification Opportunities for Analog Devices and SUNation Energy

-0.19

Correlation Coefficient

Analog Devices  SUNation Energy

Good diversification

The 3 months correlation between Analog and SUNation is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and SUNation Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUNation Energy 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 SUNation Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUNation Energy has no effect on the direction of Analog Devices i.e., Analog Devices and SUNation Energy go up and down completely randomly.

Pair Corralation between Analog Devices and SUNation Energy

Considering the 90-day investment horizon Analog Devices is expected to generate 0.1 times more return on investment than SUNation Energy. However, Analog Devices is 9.85 times less risky than SUNation Energy. It trades about 0.01 of its potential returns per unit of risk. SUNation Energy is currently generating about -0.04 per unit of risk. If you would invest  21,086  in Analog Devices on December 20, 2024 and sell it today you would lose (89.00) from holding Analog Devices or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Analog Devices  vs.  SUNation Energy

Analog Devices

Risk-Adjusted Performance

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.

SUNation Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days SUNation Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Analog Devices and SUNation Energy

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

The idea behind Analog Devices and SUNation Energy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.