Correlation Between Analog Devices and Technology One

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

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

Diversification Opportunities for Analog Devices and Technology One

-0.64

Correlation Coefficient

Analog Devices  Technology One

Excellent diversification

The 3 months correlation between Analog and Technology is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Technology One Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology One 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 Technology One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology One has no effect on the direction of Analog Devices i.e., Analog Devices and Technology One go up and down completely randomly.

Pair Corralation between Analog Devices and Technology One

Considering the 90-day investment horizon Analog Devices is expected to under-perform the Technology One. But the stock apears to be less risky and, when comparing its historical volatility, Analog Devices is 5.53 times less risky than Technology One. The stock trades about -0.05 of its potential returns per unit of risk. The Technology One Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  962.00  in Technology One Limited on October 9, 2024 and sell it today you would earn a total of  1,008  from holding Technology One Limited or generate 104.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Analog Devices  vs.  Technology One Limited

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.

Technology One

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Technology One Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Technology One reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and Technology One

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

The idea behind Analog Devices and Technology One Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.