Correlation Between Power Integrations and Ams AG

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

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

Diversification Opportunities for Power Integrations and Ams AG

-0.01

Correlation Coefficient

Power Integrations  Ams AG

Good diversification

The 3 months correlation between Power and Ams is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Power Integrations and ams AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ams AG and Power Integrations 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 Power Integrations are associated (or correlated) with Ams AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ams AG has no effect on the direction of Power Integrations i.e., Power Integrations and Ams AG go up and down completely randomly.

Pair Corralation between Power Integrations and Ams AG

Given the investment horizon of 90 days Power Integrations is expected to under-perform the Ams AG. But the stock apears to be less risky and, when comparing its historical volatility, Power Integrations is 58.6 times less risky than Ams AG. The stock trades about -0.02 of its potential returns per unit of risk. The ams AG is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  975.00  in ams AG on October 4, 2024 and sell it today you would lose (240.00) from holding ams AG or give up 24.62% of portfolio value over 90 days.

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

Power Integrations  vs.  ams AG

Power Integrations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Integrations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Power Integrations is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

ams AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ams AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Ams AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Integrations and Ams AG

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

The idea behind Power Integrations and ams AG 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.