Correlation Between Globalfoundries and EMCORE

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

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

Diversification Opportunities for Globalfoundries and EMCORE

0.68

Correlation Coefficient

Globalfoundries  EMCORE

Poor diversification

The 3 months correlation between Globalfoundries and EMCORE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE and Globalfoundries 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 Globalfoundries are associated (or correlated) with EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of Globalfoundries i.e., Globalfoundries and EMCORE go up and down completely randomly.

Pair Corralation between Globalfoundries and EMCORE

Considering the 90-day investment horizon Globalfoundries is expected to generate 2.83 times more return on investment than EMCORE. However, Globalfoundries is 2.83 times more volatile than EMCORE. It trades about 0.04 of its potential returns per unit of risk. EMCORE is currently generating about 0.05 per unit of risk. If you would invest  4,200  in Globalfoundries on October 22, 2024 and sell it today you would earn a total of  110.00  from holding Globalfoundries or generate 2.62% return on investment over 90 days.

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

Globalfoundries  vs.  EMCORE

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

EMCORE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCORE are ranked lower than 9 (%) 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.

Pair Trading with Globalfoundries and EMCORE

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

The idea behind Globalfoundries and EMCORE 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..