Correlation Between Alpha and Semtech

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

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

Diversification Opportunities for Alpha and Semtech

0.83

Correlation Coefficient

Alpha  Semtech

Very poor diversification

The 3 months correlation between Alpha and Semtech is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Alpha and Omega and Semtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semtech and Alpha 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 Alpha and Omega are associated (or correlated) with Semtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semtech has no effect on the direction of Alpha i.e., Alpha and Semtech go up and down completely randomly.

Pair Corralation between Alpha and Semtech

Given the investment horizon of 90 days Alpha and Omega is expected to generate 0.6 times more return on investment than Semtech. However, Alpha and Omega is 1.65 times less risky than Semtech. It trades about -0.1 of its potential returns per unit of risk. Semtech is currently generating about -0.08 per unit of risk. If you would invest  3,692  in Alpha and Omega on December 28, 2024 and sell it today you would lose (1,089) from holding Alpha and Omega or give up 29.5% of portfolio value over 90 days.

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

Alpha and Omega  vs.  Semtech

Alpha and Omega

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha and Omega has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Semtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic 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 Alpha and Semtech

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

The idea behind Alpha and Omega and Semtech 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..