Correlation Between Analog Devices and Semtech

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

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

Diversification Opportunities for Analog Devices and Semtech

-0.37

Correlation Coefficient

Analog Devices  Semtech

Very good diversification

The 3 months correlation between Analog and Semtech is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Semtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semtech 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 Semtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semtech has no effect on the direction of Analog Devices i.e., Analog Devices and Semtech go up and down completely randomly.

Pair Corralation between Analog Devices and Semtech

Considering the 90-day investment horizon Analog Devices is expected to under-perform the Semtech. But the stock apears to be less risky and, when comparing its historical volatility, Analog Devices is 2.23 times less risky than Semtech. The stock trades about -0.01 of its potential returns per unit of risk. The Semtech is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,059  in Semtech on September 12, 2024 and sell it today you would earn a total of  2,231  from holding Semtech or generate 54.96% return on investment over 90 days.

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

Analog Devices  vs.  Semtech

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Semtech

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Semtech are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Semtech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and Semtech

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

The idea behind Analog Devices and Semtech 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.