Correlation Between Lattice Semiconductor and Analog Devices

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

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

Diversification Opportunities for Lattice Semiconductor and Analog Devices

0.49

Correlation Coefficient

Lattice Semiconductor  Analog Devices

Very weak diversification

The 3 months correlation between Lattice and Analog is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lattice Semiconductor and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Lattice 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 Lattice Semiconductor 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 Lattice Semiconductor i.e., Lattice Semiconductor and Analog Devices go up and down completely randomly.

Pair Corralation between Lattice Semiconductor and Analog Devices

Given the investment horizon of 90 days Lattice Semiconductor is expected to under-perform the Analog Devices. In addition to that, Lattice Semiconductor is 1.26 times more volatile than Analog Devices. It trades about 0.0 of its total potential returns per unit of risk. Analog Devices is currently generating about 0.0 per unit of volatility. If you would invest  21,164  in Analog Devices on December 29, 2024 and sell it today you would lose (270.00) from holding Analog Devices or give up 1.28% of portfolio value over 90 days.

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

Lattice Semiconductor  vs.  Analog Devices

Lattice Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lattice Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Lattice Semiconductor is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Analog Devices

Risk-Adjusted Performance

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 Lattice Semiconductor and Analog Devices

The main advantage of trading using opposite Lattice Semiconductor and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lattice Semiconductor 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 Lattice Semiconductor 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.