Correlation Between Allegro Microsystems and Intchains Group

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

By analyzing existing cross correlation between Allegro Microsystems and Intchains Group Limited, you can compare the effects of market volatilities on Allegro Microsystems and Intchains Group 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 Allegro Microsystems with a short position of Intchains Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegro Microsystems and Intchains Group.

Diversification Opportunities for Allegro Microsystems and Intchains Group

-0.35

Correlation Coefficient

Allegro Microsystems  Intchains Group

Very good diversification

The 3 months correlation between Allegro and Intchains is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Allegro Microsystems and Intchains Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intchains Group and Allegro Microsystems 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 Allegro Microsystems are associated (or correlated) with Intchains Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intchains Group has no effect on the direction of Allegro Microsystems i.e., Allegro Microsystems and Intchains Group go up and down completely randomly.

Pair Corralation between Allegro Microsystems and Intchains Group

Given the investment horizon of 90 days Allegro Microsystems is expected to generate 28.84 times less return on investment than Intchains Group. But when comparing it to its historical volatility, Allegro Microsystems is 5.46 times less risky than Intchains Group. It trades about 0.01 of its potential returns per unit of risk. Intchains Group Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  511.00  in Intchains Group Limited on December 1, 2024 and sell it today you would lose (116.00) from holding Intchains Group Limited or give up 22.7% of portfolio value over 90 days.

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

Allegro Microsystems  vs.  Intchains Group Limited

Allegro Microsystems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allegro Microsystems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Allegro Microsystems is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Intchains Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intchains Group Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, Intchains Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allegro Microsystems and Intchains Group

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

The idea behind Allegro Microsystems and Intchains Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.