Correlation Between EMCORE and Monolithic Power
Can any of the company-specific risk be diversified away by investing in both EMCORE and Monolithic Power 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 Monolithic Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCORE and Monolithic Power Systems, you can compare the effects of market volatilities on EMCORE and Monolithic Power 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 Monolithic Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCORE and Monolithic Power.
Diversification Opportunities for EMCORE and Monolithic Power
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between EMCORE and Monolithic is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding EMCORE and Monolithic Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monolithic Power Systems 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 Monolithic Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monolithic Power Systems has no effect on the direction of EMCORE i.e., EMCORE and Monolithic Power go up and down completely randomly.
Pair Corralation between EMCORE and Monolithic Power
Given the investment horizon of 90 days EMCORE is expected to under-perform the Monolithic Power. In addition to that, EMCORE is 2.25 times more volatile than Monolithic Power Systems. It trades about 0.0 of its total potential returns per unit of risk. Monolithic Power Systems is currently generating about 0.04 per unit of volatility. If you would invest 39,268 in Monolithic Power Systems on October 4, 2024 and sell it today you would earn a total of 19,891 from holding Monolithic Power Systems or generate 50.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
EMCORE vs. Monolithic Power Systems
Performance |
Timeline |
EMCORE |
Monolithic Power Systems |
EMCORE and Monolithic Power Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EMCORE and Monolithic Power
The main advantage of trading using opposite EMCORE and Monolithic Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCORE position performs unexpectedly, Monolithic Power 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 Monolithic Power will offset losses from the drop in Monolithic Power's long position.The idea behind EMCORE and Monolithic Power Systems 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.Monolithic Power vs. Texas Instruments Incorporated | Monolithic Power vs. Microchip Technology | Monolithic Power vs. NXP Semiconductors NV | Monolithic Power vs. ON Semiconductor |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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