Correlation Between Semtech and Alpha

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

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

Diversification Opportunities for Semtech and Alpha

0.83

Correlation Coefficient

Semtech  Alpha

Very poor diversification

The 3 months correlation between Semtech and Alpha is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and Alpha and Omega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha and Omega and Semtech 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 Semtech are associated (or correlated) with Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha and Omega has no effect on the direction of Semtech i.e., Semtech and Alpha go up and down completely randomly.

Pair Corralation between Semtech and Alpha

Given the investment horizon of 90 days Semtech is expected to under-perform the Alpha. In addition to that, Semtech is 1.65 times more volatile than Alpha and Omega. It trades about -0.08 of its total potential returns per unit of risk. Alpha and Omega is currently generating about -0.1 per unit of volatility. If you would invest  3,692  in Alpha and Omega on December 28, 2024 and sell it today you would lose (1,089) from holding Alpha and Omega or give up 29.5% of portfolio value over 90 days.

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

Semtech  vs.  Alpha and Omega

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Alpha and Omega

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha and Omega has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Semtech and Alpha

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

The idea behind Semtech and Alpha and Omega 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.