Correlation Between Disco Corp and Cohu

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

By analyzing existing cross correlation between Disco Corp ADR and Cohu Inc, you can compare the effects of market volatilities on Disco Corp and Cohu 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 Disco Corp with a short position of Cohu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disco Corp and Cohu.

Diversification Opportunities for Disco Corp and Cohu

0.67

Correlation Coefficient

Disco Corp  Cohu

Poor diversification

The 3 months correlation between Disco and Cohu is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Disco Corp ADR and Cohu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohu Inc and Disco Corp 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 Disco Corp ADR are associated (or correlated) with Cohu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohu Inc has no effect on the direction of Disco Corp i.e., Disco Corp and Cohu go up and down completely randomly.

Pair Corralation between Disco Corp and Cohu

Assuming the 90 days horizon Disco Corp ADR is expected to under-perform the Cohu. But the pink sheet apears to be less risky and, when comparing its historical volatility, Disco Corp ADR is 1.23 times less risky than Cohu. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Cohu Inc is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,610  in Cohu Inc on September 22, 2024 and sell it today you would lose (82.00) from holding Cohu Inc or give up 3.14% of portfolio value over 90 days.

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

Disco Corp ADR  vs.  Cohu Inc

Disco Corp ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Disco Corp ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Disco Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cohu Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cohu Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, Cohu is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Disco Corp and Cohu

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

The idea behind Disco Corp ADR and Cohu Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.