Correlation Between Analog Devices and ChipMOS Technologies

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

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

Diversification Opportunities for Analog Devices and ChipMOS Technologies

0.73

Correlation Coefficient

Analog Devices  ChipMOS Technologies

Poor diversification

The 3 months correlation between Analog and ChipMOS is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and ChipMOS Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChipMOS Technologies 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 ChipMOS Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChipMOS Technologies has no effect on the direction of Analog Devices i.e., Analog Devices and ChipMOS Technologies go up and down completely randomly.

Pair Corralation between Analog Devices and ChipMOS Technologies

Considering the 90-day investment horizon Analog Devices is expected to generate 1.03 times more return on investment than ChipMOS Technologies. However, Analog Devices is 1.03 times more volatile than ChipMOS Technologies. It trades about -0.02 of its potential returns per unit of risk. ChipMOS Technologies is currently generating about -0.29 per unit of risk. If you would invest  22,419  in Analog Devices on September 5, 2024 and sell it today you would lose (265.00) from holding Analog Devices or give up 1.18% of portfolio value over 90 days.

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

Analog Devices  vs.  ChipMOS Technologies

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.

ChipMOS Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChipMOS Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Analog Devices and ChipMOS Technologies

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

The idea behind Analog Devices and ChipMOS 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.