Correlation Between Sitime and NVE

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

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

Diversification Opportunities for Sitime and NVE

0.26

Correlation Coefficient

Sitime  NVE

Modest diversification

The 3 months correlation between Sitime and NVE is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sitime and NVE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVE Corporation and Sitime 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 Sitime are associated (or correlated) with NVE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVE Corporation has no effect on the direction of Sitime i.e., Sitime and NVE go up and down completely randomly.

Pair Corralation between Sitime and NVE

Given the investment horizon of 90 days Sitime is expected to generate 1.5 times more return on investment than NVE. However, Sitime is 1.5 times more volatile than NVE Corporation. It trades about 0.07 of its potential returns per unit of risk. NVE Corporation is currently generating about 0.04 per unit of risk. If you would invest  10,162  in Sitime on September 20, 2024 and sell it today you would earn a total of  14,684  from holding Sitime or generate 144.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Sitime  vs.  NVE Corp.

Sitime

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sitime are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Sitime displayed solid returns over the last few months and may actually be approaching a breakup point.

NVE Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NVE Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, NVE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sitime and NVE

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

The idea behind Sitime and NVE Corporation 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.