Correlation Between Everspin Technologies and Skywater Technology

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

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

Diversification Opportunities for Everspin Technologies and Skywater Technology

0.62

Correlation Coefficient

Everspin Technologies  Skywater Technology

Poor diversification

The 3 months correlation between Everspin and Skywater is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Everspin Technologies and Skywater Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skywater Technology and Everspin Technologies 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 Everspin Technologies are associated (or correlated) with Skywater Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skywater Technology has no effect on the direction of Everspin Technologies i.e., Everspin Technologies and Skywater Technology go up and down completely randomly.

Pair Corralation between Everspin Technologies and Skywater Technology

Given the investment horizon of 90 days Everspin Technologies is expected to under-perform the Skywater Technology. But the stock apears to be less risky and, when comparing its historical volatility, Everspin Technologies is 3.2 times less risky than Skywater Technology. The stock trades about -0.07 of its potential returns per unit of risk. The Skywater Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  932.00  in Skywater Technology on December 6, 2024 and sell it today you would lose (117.00) from holding Skywater Technology or give up 12.55% of portfolio value over 90 days.

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

Everspin Technologies  vs.  Skywater Technology

Everspin Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Everspin Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Skywater Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Skywater Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Skywater Technology is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Everspin Technologies and Skywater Technology

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

The idea behind Everspin Technologies and Skywater Technology 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.