Correlation Between Analog Devices and INGERSOLL

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

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

Diversification Opportunities for Analog Devices and INGERSOLL

-0.31

Correlation Coefficient

Analog Devices  INGERSOLL

Very good diversification

The 3 months correlation between Analog and INGERSOLL is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and INGERSOLL RAND LUXEMBOURG FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGERSOLL RAND LUXEM 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 INGERSOLL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGERSOLL RAND LUXEM has no effect on the direction of Analog Devices i.e., Analog Devices and INGERSOLL go up and down completely randomly.

Pair Corralation between Analog Devices and INGERSOLL

Considering the 90-day investment horizon Analog Devices is expected to generate 0.7 times more return on investment than INGERSOLL. However, Analog Devices is 1.44 times less risky than INGERSOLL. It trades about -0.06 of its potential returns per unit of risk. INGERSOLL RAND LUXEMBOURG FIN is currently generating about -0.2 per unit of risk. If you would invest  21,904  in Analog Devices on October 8, 2024 and sell it today you would lose (367.00) from holding Analog Devices or give up 1.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	15.79%
Values	Daily Returns

Analog Devices  vs.  INGERSOLL RAND LUXEMBOURG FIN

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.

INGERSOLL RAND LUXEM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INGERSOLL RAND LUXEMBOURG FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for INGERSOLL RAND LUXEMBOURG FIN investors.

Pair Trading with Analog Devices and INGERSOLL

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

The idea behind Analog Devices and INGERSOLL RAND LUXEMBOURG FIN 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.