Correlation Between Power Integrations and Renesas Electronics

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

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

Diversification Opportunities for Power Integrations and Renesas Electronics

0.09

Correlation Coefficient

Power Integrations  Renesas Electronics

Significant diversification

The 3 months correlation between Power and Renesas is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Power Integrations and Renesas Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics Corp 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics Corp has no effect on the direction of Power Integrations i.e., Power Integrations and Renesas Electronics go up and down completely randomly.

Pair Corralation between Power Integrations and Renesas Electronics

Given the investment horizon of 90 days Power Integrations is expected to under-perform the Renesas Electronics. In addition to that, Power Integrations is 1.28 times more volatile than Renesas Electronics Corp. It trades about -0.19 of its total potential returns per unit of risk. Renesas Electronics Corp is currently generating about -0.22 per unit of volatility. If you would invest  683.00  in Renesas Electronics Corp on October 4, 2024 and sell it today you would lose (49.00) from holding Renesas Electronics Corp or give up 7.17% 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.  Renesas Electronics Corp

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.

Renesas Electronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renesas Electronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Power Integrations and Renesas Electronics

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

The idea behind Power Integrations and Renesas Electronics Corp 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.