Correlation Between Diodes Incorporated and Globalfoundries

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

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

Diversification Opportunities for Diodes Incorporated and Globalfoundries

0.13

Correlation Coefficient

Diodes Incorporated  Globalfoundries

Average diversification

The 3 months correlation between Diodes and Globalfoundries is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Diodes Incorporated and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries and Diodes Incorporated 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 Diodes Incorporated are associated (or correlated) with Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Diodes Incorporated i.e., Diodes Incorporated and Globalfoundries go up and down completely randomly.

Pair Corralation between Diodes Incorporated and Globalfoundries

Given the investment horizon of 90 days Diodes Incorporated is expected to generate 1.01 times more return on investment than Globalfoundries. However, Diodes Incorporated is 1.01 times more volatile than Globalfoundries. It trades about -0.02 of its potential returns per unit of risk. Globalfoundries is currently generating about -0.04 per unit of risk. If you would invest  7,061  in Diodes Incorporated on September 23, 2024 and sell it today you would lose (905.00) from holding Diodes Incorporated or give up 12.82% of portfolio value over 90 days.

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

Diodes Incorporated  vs.  Globalfoundries

Diodes Incorporated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Diodes Incorporated is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Globalfoundries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Globalfoundries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diodes Incorporated and Globalfoundries

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

The idea behind Diodes Incorporated and Globalfoundries 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.