Correlation Between Diodes Incorporated and Synaptics Incorporated

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

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

Diversification Opportunities for Diodes Incorporated and Synaptics Incorporated

0.88

Correlation Coefficient

Diodes Incorporated  Synaptics Incorporated

Very poor diversification

The 3 months correlation between Diodes and Synaptics is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Diodes Incorporated and Synaptics Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synaptics Incorporated 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 Synaptics Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synaptics Incorporated has no effect on the direction of Diodes Incorporated i.e., Diodes Incorporated and Synaptics Incorporated go up and down completely randomly.

Pair Corralation between Diodes Incorporated and Synaptics Incorporated

Given the investment horizon of 90 days Diodes Incorporated is expected to under-perform the Synaptics Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Diodes Incorporated is 1.29 times less risky than Synaptics Incorporated. The stock trades about -0.2 of its potential returns per unit of risk. The Synaptics Incorporated is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  7,550  in Synaptics Incorporated on December 30, 2024 and sell it today you would lose (1,244) from holding Synaptics Incorporated or give up 16.48% of portfolio value over 90 days.

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

Diodes Incorporated  vs.  Synaptics Incorporated

Diodes Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diodes Incorporated 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 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.

Synaptics Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Synaptics Incorporated 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 somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Diodes Incorporated and Synaptics Incorporated

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

The idea behind Diodes Incorporated and Synaptics Incorporated 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.