Correlation Between Sitime and Semtech

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

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

Diversification Opportunities for Sitime and Semtech

0.78

Correlation Coefficient

Sitime  Semtech

Poor diversification

The 3 months correlation between Sitime and Semtech is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sitime and Semtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semtech 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 Semtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semtech has no effect on the direction of Sitime i.e., Sitime and Semtech go up and down completely randomly.

Pair Corralation between Sitime and Semtech

Given the investment horizon of 90 days Sitime is expected to generate 0.93 times more return on investment than Semtech. However, Sitime is 1.07 times less risky than Semtech. It trades about 0.03 of its potential returns per unit of risk. Semtech is currently generating about 0.03 per unit of risk. If you would invest  13,319  in Sitime on November 20, 2024 and sell it today you would earn a total of  4,422  from holding Sitime or generate 33.2% return on investment over 90 days.

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

Sitime  vs.  Semtech

Sitime

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sitime has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Semtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sitime and Semtech

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

The idea behind Sitime and Semtech 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.