Correlation Between Power Integrations and AXT

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

By analyzing existing cross correlation between Power Integrations and AXT Inc, you can compare the effects of market volatilities on Power Integrations and AXT 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 AXT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Integrations and AXT.

Diversification Opportunities for Power Integrations and AXT

0.39

Correlation Coefficient

Power Integrations  AXT

Weak diversification

The 3 months correlation between Power and AXT is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Power Integrations and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT Inc 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 AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of Power Integrations i.e., Power Integrations and AXT go up and down completely randomly.

Pair Corralation between Power Integrations and AXT

Given the investment horizon of 90 days Power Integrations is expected to generate 0.36 times more return on investment than AXT. However, Power Integrations is 2.75 times less risky than AXT. It trades about -0.07 of its potential returns per unit of risk. AXT Inc is currently generating about -0.05 per unit of risk. If you would invest  6,278  in Power Integrations on December 27, 2024 and sell it today you would lose (743.00) from holding Power Integrations or give up 11.83% of portfolio value over 90 days.

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

Power Integrations  vs.  AXT Inc

Power Integrations

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Integrations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

AXT Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days AXT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Power Integrations and AXT

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

The idea behind Power Integrations and AXT Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.