Correlation Between Power Integrations and Sequans Communications

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

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

Diversification Opportunities for Power Integrations and Sequans Communications

0.41

Correlation Coefficient

Power Integrations  Sequans Communications

Very weak diversification

The 3 months correlation between Power and Sequans is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Power Integrations and Sequans Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sequans Communications 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 Sequans Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sequans Communications has no effect on the direction of Power Integrations i.e., Power Integrations and Sequans Communications go up and down completely randomly.

Pair Corralation between Power Integrations and Sequans Communications

Given the investment horizon of 90 days Power Integrations is expected to under-perform the Sequans Communications. But the stock apears to be less risky and, when comparing its historical volatility, Power Integrations is 1.67 times less risky than Sequans Communications. The stock trades about -0.04 of its potential returns per unit of risk. The Sequans Communications SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  277.00  in Sequans Communications SA on September 23, 2024 and sell it today you would earn a total of  12.00  from holding Sequans Communications SA or generate 4.33% return on investment over 90 days.

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

Power Integrations  vs.  Sequans Communications SA

Power Integrations

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Power Integrations are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Sequans Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sequans Communications SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Sequans Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Integrations and Sequans Communications

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

The idea behind Power Integrations and Sequans Communications SA 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.