Correlation Between I2S SA and Melexis NV

Can any of the company-specific risk be diversified away by investing in both I2S SA and Melexis NV 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 I2S SA and Melexis NV into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between i2S SA and Melexis NV, you can compare the effects of market volatilities on I2S SA and Melexis NV 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 I2S SA with a short position of Melexis NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of I2S SA and Melexis NV.

Diversification Opportunities for I2S SA and Melexis NV

-0.56

Correlation Coefficient

I2S SA  Melexis NV

Excellent diversification

The 3 months correlation between I2S and Melexis is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding i2S SA and Melexis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melexis NV and I2S SA 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 i2S SA are associated (or correlated) with Melexis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melexis NV has no effect on the direction of I2S SA i.e., I2S SA and Melexis NV go up and down completely randomly.

Pair Corralation between I2S SA and Melexis NV

Assuming the 90 days trading horizon i2S SA is expected to generate 1.78 times more return on investment than Melexis NV. However, I2S SA is 1.78 times more volatile than Melexis NV. It trades about 0.04 of its potential returns per unit of risk. Melexis NV is currently generating about -0.2 per unit of risk. If you would invest  830.00  in i2S SA on September 5, 2024 and sell it today you would earn a total of  50.00  from holding i2S SA or generate 6.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

i2S SA  vs.  Melexis NV

i2S SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in i2S SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, I2S SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Melexis NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melexis NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with I2S SA and Melexis NV

The main advantage of trading using opposite I2S SA and Melexis NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if I2S SA position performs unexpectedly, Melexis NV 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 Melexis NV will offset losses from the drop in Melexis NV's long position.

The idea behind i2S SA and Melexis NV 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.