Correlation Between Power Integrations and Retail Estates

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

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

Diversification Opportunities for Power Integrations and Retail Estates

-0.02

Correlation Coefficient

Power Integrations  Retail Estates

Good diversification

The 3 months correlation between Power and Retail is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Power Integrations and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV 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 Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of Power Integrations i.e., Power Integrations and Retail Estates go up and down completely randomly.

Pair Corralation between Power Integrations and Retail Estates

Assuming the 90 days horizon Power Integrations is expected to under-perform the Retail Estates. In addition to that, Power Integrations is 2.09 times more volatile than Retail Estates NV. It trades about -0.07 of its total potential returns per unit of risk. Retail Estates NV is currently generating about 0.03 per unit of volatility. If you would invest  5,840  in Retail Estates NV on December 20, 2024 and sell it today you would earn a total of  90.00  from holding Retail Estates NV or generate 1.54% return on investment over 90 days.

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

Power Integrations  vs.  Retail Estates NV

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 fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Retail Estates NV

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Retail Estates NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Retail Estates is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Power Integrations and Retail Estates

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

The idea behind Power Integrations and Retail Estates NV 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 Transaction History module to view history of all your transactions and understand their impact on performance.