Correlation Between Indie Semiconductor and Sitime

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

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

Diversification Opportunities for Indie Semiconductor and Sitime

0.6

Correlation Coefficient

Indie Semiconductor  Sitime

Poor diversification

The 3 months correlation between Indie and Sitime is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding indie Semiconductor and Sitime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitime and Indie Semiconductor 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 indie Semiconductor 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 Indie Semiconductor i.e., Indie Semiconductor and Sitime go up and down completely randomly.

Pair Corralation between Indie Semiconductor and Sitime

Given the investment horizon of 90 days Indie Semiconductor is expected to generate 3.92 times less return on investment than Sitime. In addition to that, Indie Semiconductor is 1.32 times more volatile than Sitime. It trades about 0.01 of its total potential returns per unit of risk. Sitime is currently generating about 0.07 per unit of volatility. If you would invest  10,231  in Sitime on September 19, 2024 and sell it today you would earn a total of  14,766  from holding Sitime or generate 144.33% return on investment over 90 days.

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

indie Semiconductor  vs.  Sitime

indie Semiconductor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in indie Semiconductor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Indie Semiconductor demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Sitime

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sitime are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Sitime displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indie Semiconductor and Sitime

The main advantage of trading using opposite Indie Semiconductor and Sitime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indie Semiconductor 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 indie Semiconductor 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.