Correlation Between Allegro Microsystems and Navitas Semiconductor

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

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

Diversification Opportunities for Allegro Microsystems and Navitas Semiconductor

-0.46

Correlation Coefficient

Allegro Microsystems  Navitas Semiconductor

Very good diversification

The 3 months correlation between Allegro and Navitas is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Allegro Microsystems and Navitas Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navitas Semiconductor 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 Navitas Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navitas Semiconductor has no effect on the direction of Allegro Microsystems i.e., Allegro Microsystems and Navitas Semiconductor go up and down completely randomly.

Pair Corralation between Allegro Microsystems and Navitas Semiconductor

Given the investment horizon of 90 days Allegro Microsystems is expected to generate 0.56 times more return on investment than Navitas Semiconductor. However, Allegro Microsystems is 1.8 times less risky than Navitas Semiconductor. It trades about 0.08 of its potential returns per unit of risk. Navitas Semiconductor Corp is currently generating about -0.14 per unit of risk. If you would invest  2,158  in Allegro Microsystems on December 29, 2024 and sell it today you would earn a total of  328.00  from holding Allegro Microsystems or generate 15.2% return on investment over 90 days.

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

Allegro Microsystems  vs.  Navitas Semiconductor 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 6 (%) 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.

Navitas Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Navitas Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Allegro Microsystems and Navitas Semiconductor

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

The idea behind Allegro Microsystems and Navitas Semiconductor Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.