Correlation Between Globalfoundries and Sitime

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

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

Diversification Opportunities for Globalfoundries and Sitime

0.57

Correlation Coefficient

Globalfoundries  Sitime

Very weak diversification

The 3 months correlation between Globalfoundries and Sitime is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and Sitime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitime 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 Sitime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitime has no effect on the direction of Globalfoundries i.e., Globalfoundries and Sitime go up and down completely randomly.

Pair Corralation between Globalfoundries and Sitime

Considering the 90-day investment horizon Globalfoundries is expected to generate 0.44 times more return on investment than Sitime. However, Globalfoundries is 2.27 times less risky than Sitime. It trades about -0.08 of its potential returns per unit of risk. Sitime is currently generating about -0.06 per unit of risk. If you would invest  4,320  in Globalfoundries on December 30, 2024 and sell it today you would lose (631.00) from holding Globalfoundries or give up 14.61% of portfolio value over 90 days.

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

Globalfoundries  vs.  Sitime

Globalfoundries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globalfoundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sitime

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sitime has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Globalfoundries and Sitime

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

The idea behind Globalfoundries and Sitime 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.