Correlation Between Monolithic Power and Intel

Can any of the company-specific risk be diversified away by investing in both Monolithic Power and Intel 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 Intel 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 Intel, you can compare the effects of market volatilities on Monolithic Power and Intel 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 Intel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monolithic Power and Intel.

Diversification Opportunities for Monolithic Power and Intel

0.27

Correlation Coefficient

Monolithic Power  Intel

Modest diversification

The 3 months correlation between Monolithic and Intel is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Monolithic Power Systems and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Monolithic Power i.e., Monolithic Power and Intel go up and down completely randomly.

Pair Corralation between Monolithic Power and Intel

Given the investment horizon of 90 days Monolithic Power is expected to generate 4.6 times less return on investment than Intel. But when comparing it to its historical volatility, Monolithic Power Systems is 1.15 times less risky than Intel. It trades about 0.02 of its potential returns per unit of risk. Intel is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,982  in Intel on December 29, 2024 and sell it today you would earn a total of  289.00  from holding Intel or generate 14.58% return on investment over 90 days.

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

Monolithic Power Systems  vs.  Intel

Monolithic Power Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monolithic Power Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Monolithic Power is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Intel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Intel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monolithic Power and Intel

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

The idea behind Monolithic Power Systems and Intel 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.