Correlation Between Semtech and SGH Old

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Can any of the company-specific risk be diversified away by investing in both Semtech and SGH Old 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 SGH Old into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Semtech and SGH Old, you can compare the effects of market volatilities on Semtech and SGH Old 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 SGH Old. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semtech and SGH Old.

Diversification Opportunities for Semtech and SGH Old

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Semtech and SGH is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and SGH Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGH Old 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 SGH Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGH Old has no effect on the direction of Semtech i.e., Semtech and SGH Old go up and down completely randomly.

Pair Corralation between Semtech and SGH Old

Given the investment horizon of 90 days Semtech is expected to generate 1.01 times more return on investment than SGH Old. However, Semtech is 1.01 times more volatile than SGH Old. It trades about 0.06 of its potential returns per unit of risk. SGH Old is currently generating about 0.03 per unit of risk. If you would invest  3,399  in Semtech on October 25, 2024 and sell it today you would earn a total of  4,201  from holding Semtech or generate 123.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy86.82%
ValuesDaily Returns

Semtech  vs.  SGH Old

 Performance 
       Timeline  
Semtech 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Semtech are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Semtech exhibited solid returns over the last few months and may actually be approaching a breakup point.
SGH Old 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SGH Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, SGH Old is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Semtech and SGH Old Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Semtech and SGH Old

The main advantage of trading using opposite Semtech and SGH Old positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semtech position performs unexpectedly, SGH Old 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 SGH Old will offset losses from the drop in SGH Old's long position.
The idea behind Semtech and SGH Old 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.
Check out your portfolio center.
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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