Correlation Between Semtech and Flex

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

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

Diversification Opportunities for Semtech and Flex

0.61

Correlation Coefficient

Semtech  Flex

Poor diversification

The 3 months correlation between Semtech and Flex is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and Flex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flex 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 Flex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flex has no effect on the direction of Semtech i.e., Semtech and Flex go up and down completely randomly.

Pair Corralation between Semtech and Flex

Given the investment horizon of 90 days Semtech is expected to under-perform the Flex. In addition to that, Semtech is 2.56 times more volatile than Flex. It trades about -0.06 of its total potential returns per unit of risk. Flex is currently generating about -0.05 per unit of volatility. If you would invest  3,863  in Flex on December 28, 2024 and sell it today you would lose (417.00) from holding Flex or give up 10.79% of portfolio value over 90 days.

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

Semtech  vs.  Flex

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.

Flex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Semtech and Flex

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

The idea behind Semtech and Flex 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.