Correlation Between Allegro Microsystems and NVE

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

By analyzing existing cross correlation between Allegro Microsystems and NVE Corporation, you can compare the effects of market volatilities on Allegro Microsystems and NVE 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 NVE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegro Microsystems and NVE.

Diversification Opportunities for Allegro Microsystems and NVE

-0.29

Correlation Coefficient

Allegro Microsystems  NVE

Very good diversification

The 3 months correlation between Allegro and NVE is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Allegro Microsystems and NVE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVE Corporation 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 NVE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVE Corporation has no effect on the direction of Allegro Microsystems i.e., Allegro Microsystems and NVE go up and down completely randomly.

Pair Corralation between Allegro Microsystems and NVE

Given the investment horizon of 90 days Allegro Microsystems is expected to generate 1.59 times more return on investment than NVE. However, Allegro Microsystems is 1.59 times more volatile than NVE Corporation. It trades about 0.11 of its potential returns per unit of risk. NVE Corporation is currently generating about -0.11 per unit of risk. If you would invest  2,158  in Allegro Microsystems on December 28, 2024 and sell it today you would earn a total of  527.00  from holding Allegro Microsystems or generate 24.42% return on investment over 90 days.

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

Allegro Microsystems  vs.  NVE Corp.

Allegro Microsystems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Allegro Microsystems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Allegro Microsystems displayed solid returns over the last few months and may actually be approaching a breakup point.

NVE Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVE Corporation 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 technical and fundamental 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 Allegro Microsystems and NVE

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

The idea behind Allegro Microsystems and NVE Corporation 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.