Correlation Between Lattice Semiconductor and Monolithic Power

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Can any of the company-specific risk be diversified away by investing in both Lattice Semiconductor and Monolithic Power 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 Lattice Semiconductor and Monolithic Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lattice Semiconductor and Monolithic Power Systems, you can compare the effects of market volatilities on Lattice Semiconductor and Monolithic Power 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 Lattice Semiconductor with a short position of Monolithic Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lattice Semiconductor and Monolithic Power.

Diversification Opportunities for Lattice Semiconductor and Monolithic Power

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between Lattice and Monolithic is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lattice Semiconductor and Monolithic Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monolithic Power Systems and Lattice Semiconductor 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 Lattice Semiconductor are associated (or correlated) with Monolithic Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monolithic Power Systems has no effect on the direction of Lattice Semiconductor i.e., Lattice Semiconductor and Monolithic Power go up and down completely randomly.

Pair Corralation between Lattice Semiconductor and Monolithic Power

Given the investment horizon of 90 days Lattice Semiconductor is expected to generate 0.81 times more return on investment than Monolithic Power. However, Lattice Semiconductor is 1.23 times less risky than Monolithic Power. It trades about 0.16 of its potential returns per unit of risk. Monolithic Power Systems is currently generating about -0.14 per unit of risk. If you would invest  4,305  in Lattice Semiconductor on September 2, 2024 and sell it today you would earn a total of  1,370  from holding Lattice Semiconductor or generate 31.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Lattice Semiconductor  vs.  Monolithic Power Systems

 Performance 
       Timeline  
Lattice Semiconductor 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Lattice Semiconductor are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Lattice Semiconductor exhibited solid returns over the last few months and may actually be approaching a breakup point.
Monolithic Power Systems 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Monolithic Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent 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.

Lattice Semiconductor and Monolithic Power Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lattice Semiconductor and Monolithic Power

The main advantage of trading using opposite Lattice Semiconductor and Monolithic Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lattice Semiconductor position performs unexpectedly, Monolithic Power 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 Monolithic Power will offset losses from the drop in Monolithic Power's long position.
The idea behind Lattice Semiconductor and Monolithic Power Systems 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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