Correlation Between Texas Instruments and POET Technologies

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

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

Diversification Opportunities for Texas Instruments and POET Technologies

0.1

Correlation Coefficient

Texas Instruments  POET Technologies

Average diversification

The 3 months correlation between Texas and POET is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Texas Instruments Incorporated and POET Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POET Technologies and Texas Instruments 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 Texas Instruments Incorporated are associated (or correlated) with POET Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POET Technologies has no effect on the direction of Texas Instruments i.e., Texas Instruments and POET Technologies go up and down completely randomly.

Pair Corralation between Texas Instruments and POET Technologies

Considering the 90-day investment horizon Texas Instruments Incorporated is expected to generate 0.29 times more return on investment than POET Technologies. However, Texas Instruments Incorporated is 3.44 times less risky than POET Technologies. It trades about -0.04 of its potential returns per unit of risk. POET Technologies is currently generating about -0.05 per unit of risk. If you would invest  19,103  in Texas Instruments Incorporated on December 24, 2024 and sell it today you would lose (1,203) from holding Texas Instruments Incorporated or give up 6.3% of portfolio value over 90 days.

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

Texas Instruments Incorporated  vs.  POET Technologies

Texas Instruments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Texas Instruments Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Texas Instruments is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

POET Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days POET Technologies 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 technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Texas Instruments and POET Technologies

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

The idea behind Texas Instruments Incorporated and POET Technologies 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.