Correlation Between Skyworks Solutions and Analog Devices

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

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

Diversification Opportunities for Skyworks Solutions and Analog Devices

-0.21

Correlation Coefficient

Skyworks Solutions  Analog Devices

Very good diversification

The 3 months correlation between Skyworks and Analog is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Skyworks Solutions and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Skyworks Solutions 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 Skyworks Solutions are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Skyworks Solutions i.e., Skyworks Solutions and Analog Devices go up and down completely randomly.

Pair Corralation between Skyworks Solutions and Analog Devices

Given the investment horizon of 90 days Skyworks Solutions is expected to under-perform the Analog Devices. In addition to that, Skyworks Solutions is 1.69 times more volatile than Analog Devices. It trades about -0.1 of its total potential returns per unit of risk. Analog Devices is currently generating about 0.07 per unit of volatility. If you would invest  21,713  in Analog Devices on November 29, 2024 and sell it today you would earn a total of  1,660  from holding Analog Devices or generate 7.65% return on investment over 90 days.

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

Skyworks Solutions  vs.  Analog Devices

Skyworks Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Skyworks Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Analog Devices

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Analog Devices may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Skyworks Solutions and Analog Devices

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

The idea behind Skyworks Solutions and Analog Devices 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.