Correlation Between Monolithic Power and Sequans Communications

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

Diversification Opportunities for Monolithic Power and Sequans Communications

-0.68

Correlation Coefficient

Monolithic Power  Sequans Communications

Excellent diversification

The 3 months correlation between Monolithic and Sequans is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Monolithic Power Systems and Sequans Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sequans Communications 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 Sequans Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sequans Communications has no effect on the direction of Monolithic Power i.e., Monolithic Power and Sequans Communications go up and down completely randomly.

Pair Corralation between Monolithic Power and Sequans Communications

Given the investment horizon of 90 days Monolithic Power Systems is expected to generate 0.42 times more return on investment than Sequans Communications. However, Monolithic Power Systems is 2.38 times less risky than Sequans Communications. It trades about 0.05 of its potential returns per unit of risk. Sequans Communications SA is currently generating about 0.01 per unit of risk. If you would invest  33,867  in Monolithic Power Systems on September 23, 2024 and sell it today you would earn a total of  25,455  from holding Monolithic Power Systems or generate 75.16% return on investment over 90 days.

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

Monolithic Power Systems  vs.  Sequans Communications SA

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 unfluctuating 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.

Sequans Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sequans Communications SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Sequans Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monolithic Power and Sequans Communications

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

The idea behind Monolithic Power Systems and Sequans Communications SA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.