Correlation Between Monolithic Power and ChipMOS Technologies

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

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

Diversification Opportunities for Monolithic Power and ChipMOS Technologies

0.96

Correlation Coefficient

Monolithic Power  ChipMOS Technologies

Almost no diversification

The 3 months correlation between Monolithic and ChipMOS is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Monolithic Power Systems and ChipMOS Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChipMOS Technologies and Monolithic Power 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 Monolithic Power Systems are associated (or correlated) with ChipMOS Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChipMOS Technologies has no effect on the direction of Monolithic Power i.e., Monolithic Power and ChipMOS Technologies go up and down completely randomly.

Pair Corralation between Monolithic Power and ChipMOS Technologies

Given the investment horizon of 90 days Monolithic Power Systems is expected to under-perform the ChipMOS Technologies. In addition to that, Monolithic Power is 2.63 times more volatile than ChipMOS Technologies. It trades about -0.13 of its total potential returns per unit of risk. ChipMOS Technologies is currently generating about -0.16 per unit of volatility. If you would invest  2,238  in ChipMOS Technologies on September 12, 2024 and sell it today you would lose (314.00) from holding ChipMOS Technologies or give up 14.03% of portfolio value over 90 days.

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

Monolithic Power Systems  vs.  ChipMOS Technologies

Monolithic Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monolithic Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ChipMOS Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Monolithic Power and ChipMOS Technologies

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

The idea behind Monolithic Power Systems and ChipMOS Technologies 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.