Correlation Between Analog Devices and GSI Technology

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

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

Diversification Opportunities for Analog Devices and GSI Technology

0.57

Correlation Coefficient

Analog Devices  GSI Technology

Very weak diversification

The 3 months correlation between Analog and GSI is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and GSI Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSI Technology and Analog Devices 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 Analog Devices are associated (or correlated) with GSI Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSI Technology has no effect on the direction of Analog Devices i.e., Analog Devices and GSI Technology go up and down completely randomly.

Pair Corralation between Analog Devices and GSI Technology

Considering the 90-day investment horizon Analog Devices is expected to generate 12.15 times less return on investment than GSI Technology. But when comparing it to its historical volatility, Analog Devices is 2.85 times less risky than GSI Technology. It trades about 0.02 of its potential returns per unit of risk. GSI Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  251.00  in GSI Technology on September 5, 2024 and sell it today you would earn a total of  50.00  from holding GSI Technology or generate 19.92% return on investment over 90 days.

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

Analog Devices  vs.  GSI Technology

Analog Devices

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

GSI Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GSI Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, GSI Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and GSI Technology

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

The idea behind Analog Devices and GSI Technology 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.