Correlation Between Analog Devices and OCCIDENTAL

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

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

Diversification Opportunities for Analog Devices and OCCIDENTAL

-0.11

Correlation Coefficient

Analog Devices  OCCIDENTAL

Good diversification

The 3 months correlation between Analog and OCCIDENTAL is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and OCCIDENTAL PETE P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OCCIDENTAL PETE P 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 OCCIDENTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OCCIDENTAL PETE P has no effect on the direction of Analog Devices i.e., Analog Devices and OCCIDENTAL go up and down completely randomly.

Pair Corralation between Analog Devices and OCCIDENTAL

Considering the 90-day investment horizon Analog Devices is expected to generate 1.7 times more return on investment than OCCIDENTAL. However, Analog Devices is 1.7 times more volatile than OCCIDENTAL PETE P. It trades about -0.05 of its potential returns per unit of risk. OCCIDENTAL PETE P is currently generating about -0.21 per unit of risk. If you would invest  22,973  in Analog Devices on October 10, 2024 and sell it today you would lose (1,386) from holding Analog Devices or give up 6.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	32.79%
Values	Daily Returns

Analog Devices  vs.  OCCIDENTAL PETE P

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.

OCCIDENTAL PETE P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OCCIDENTAL PETE P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for OCCIDENTAL PETE P investors.

Pair Trading with Analog Devices and OCCIDENTAL

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

The idea behind Analog Devices and OCCIDENTAL PETE P 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.