Correlation Between Sipef NV and Melexis NV

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

By analyzing existing cross correlation between Sipef NV and Melexis NV, you can compare the effects of market volatilities on Sipef NV and Melexis NV 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 Sipef NV with a short position of Melexis NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sipef NV and Melexis NV.

Diversification Opportunities for Sipef NV and Melexis NV

0.14

Correlation Coefficient

Sipef NV  Melexis NV

Average diversification

The 3 months correlation between Sipef and Melexis is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sipef NV and Melexis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melexis NV and Sipef NV 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 Sipef NV are associated (or correlated) with Melexis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melexis NV has no effect on the direction of Sipef NV i.e., Sipef NV and Melexis NV go up and down completely randomly.

Pair Corralation between Sipef NV and Melexis NV

Assuming the 90 days trading horizon Sipef NV is expected to generate 0.36 times more return on investment than Melexis NV. However, Sipef NV is 2.81 times less risky than Melexis NV. It trades about 0.1 of its potential returns per unit of risk. Melexis NV is currently generating about 0.02 per unit of risk. If you would invest  5,620  in Sipef NV on December 2, 2024 and sell it today you would earn a total of  320.00  from holding Sipef NV or generate 5.69% return on investment over 90 days.

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

Sipef NV  vs.  Melexis NV

Sipef NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sipef NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Sipef NV is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Melexis NV

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Melexis NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Melexis NV is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sipef NV and Melexis NV

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

The idea behind Sipef NV and Melexis 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.