Correlation Between System and ITM Semiconductor

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

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

Diversification Opportunities for System and ITM Semiconductor

0.3

Correlation Coefficient

System  ITM Semiconductor

Weak diversification

The 3 months correlation between System and ITM is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and ITM Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Semiconductor and System 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 System and Application are associated (or correlated) with ITM Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Semiconductor has no effect on the direction of System i.e., System and ITM Semiconductor go up and down completely randomly.

Pair Corralation between System and ITM Semiconductor

Assuming the 90 days trading horizon System and Application is expected to generate 1.65 times more return on investment than ITM Semiconductor. However, System is 1.65 times more volatile than ITM Semiconductor Co. It trades about 0.02 of its potential returns per unit of risk. ITM Semiconductor Co is currently generating about -0.33 per unit of risk. If you would invest  157,700  in System and Application on September 23, 2024 and sell it today you would earn a total of  2,500  from holding System and Application or generate 1.59% return on investment over 90 days.

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

System and Application  vs.  ITM Semiconductor Co

System and Application

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in System and Application are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, System is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ITM Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITM Semiconductor Co 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 somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with System and ITM Semiconductor

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

The idea behind System and Application and ITM Semiconductor Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.