Correlation Between Garmin and Analog Devices

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

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

Diversification Opportunities for Garmin and Analog Devices

-0.57

Correlation Coefficient

Garmin  Analog Devices

Excellent diversification

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

Pair Corralation between Garmin and Analog Devices

Given the investment horizon of 90 days Garmin is expected to under-perform the Analog Devices. But the stock apears to be less risky and, when comparing its historical volatility, Garmin is 1.21 times less risky than Analog Devices. The stock trades about -0.14 of its potential returns per unit of risk. The Analog Devices is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  21,561  in Analog Devices on October 11, 2024 and sell it today you would earn a total of  483.00  from holding Analog Devices or generate 2.24% return on investment over 90 days.

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

Garmin  vs.  Analog Devices

Garmin

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Garmin displayed solid returns over the last few months and may actually be approaching a breakup point.

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Garmin and Analog Devices

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

The idea behind Garmin and Analog Devices 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.