Correlation Between Network CN and Analog Devices

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

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

Diversification Opportunities for Network CN and Analog Devices

0.45

Correlation Coefficient

Network CN  Analog Devices

Very weak diversification

The 3 months correlation between Network and Analog is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Network CN and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Network CN 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 Network CN 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 Network CN i.e., Network CN and Analog Devices go up and down completely randomly.

Pair Corralation between Network CN and Analog Devices

Given the investment horizon of 90 days Network CN is expected to generate 102.48 times more return on investment than Analog Devices. However, Network CN is 102.48 times more volatile than Analog Devices. It trades about 0.27 of its potential returns per unit of risk. Analog Devices is currently generating about -0.01 per unit of risk. If you would invest  0.14  in Network CN on September 14, 2024 and sell it today you would earn a total of  5.86  from holding Network CN or generate 4185.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Network CN  vs.  Analog Devices

Network CN

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Network CN are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Network CN displayed solid returns over the last few months and may actually be approaching a breakup point.

Analog Devices

Risk-Adjusted Performance

0 of 100

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 Network CN and Analog Devices

The main advantage of trading using opposite Network CN and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Network CN 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 Network CN 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 Stocks Directory module to find actively traded stocks across global markets.