Correlation Between EMCORE and Infineon Technologies

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

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

Diversification Opportunities for EMCORE and Infineon Technologies

0.72

Correlation Coefficient

EMCORE  Infineon Technologies

Poor diversification

The 3 months correlation between EMCORE and Infineon is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding EMCORE and Infineon Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infineon Technologies and EMCORE 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 EMCORE are associated (or correlated) with Infineon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infineon Technologies has no effect on the direction of EMCORE i.e., EMCORE and Infineon Technologies go up and down completely randomly.

Pair Corralation between EMCORE and Infineon Technologies

If you would invest  477.00  in EMCORE on October 5, 2024 and sell it today you would lose (177.00) from holding EMCORE or give up 37.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.37%
Values	Daily Returns

EMCORE  vs.  Infineon Technologies AG

EMCORE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCORE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal forward-looking signals, EMCORE reported solid returns over the last few months and may actually be approaching a breakup point.

Infineon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infineon Technologies AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Infineon Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EMCORE and Infineon Technologies

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

The idea behind EMCORE and Infineon Technologies AG 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.