Correlation Between Power Integrations and Lattice Semiconductor

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

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

Diversification Opportunities for Power Integrations and Lattice Semiconductor

0.16

Correlation Coefficient

Power Integrations  Lattice Semiconductor

Average diversification

The 3 months correlation between Power and Lattice is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Power Integrations and Lattice Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lattice Semiconductor 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 Lattice Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lattice Semiconductor has no effect on the direction of Power Integrations i.e., Power Integrations and Lattice Semiconductor go up and down completely randomly.

Pair Corralation between Power Integrations and Lattice Semiconductor

Given the investment horizon of 90 days Power Integrations is expected to under-perform the Lattice Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Power Integrations is 1.13 times less risky than Lattice Semiconductor. The stock trades about -0.1 of its potential returns per unit of risk. The Lattice Semiconductor is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,672  in Lattice Semiconductor on December 28, 2024 and sell it today you would lose (142.00) from holding Lattice Semiconductor or give up 2.5% of portfolio value over 90 days.

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

Power Integrations  vs.  Lattice Semiconductor

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 unsteady 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.

Lattice Semiconductor

Risk-Adjusted Performance

Insignificant

Over the last 90 days Lattice Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Lattice Semiconductor is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Power Integrations and Lattice Semiconductor

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

The idea behind Power Integrations and Lattice Semiconductor 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.