Correlation Between Monolithic Power and Globalfoundries

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

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

Diversification Opportunities for Monolithic Power and Globalfoundries

-0.36

Correlation Coefficient

Monolithic Power  Globalfoundries

Very good diversification

The 3 months correlation between Monolithic and Globalfoundries is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Monolithic Power Systems and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries and Monolithic Power 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 Monolithic Power Systems are associated (or correlated) with Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Monolithic Power i.e., Monolithic Power and Globalfoundries go up and down completely randomly.

Pair Corralation between Monolithic Power and Globalfoundries

Given the investment horizon of 90 days Monolithic Power Systems is expected to under-perform the Globalfoundries. In addition to that, Monolithic Power is 1.13 times more volatile than Globalfoundries. It trades about -0.14 of its total potential returns per unit of risk. Globalfoundries is currently generating about 0.02 per unit of volatility. If you would invest  4,268  in Globalfoundries on September 2, 2024 and sell it today you would earn a total of  57.00  from holding Globalfoundries or generate 1.34% return on investment over 90 days.

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

Monolithic Power Systems  vs.  Globalfoundries

Monolithic Power Systems

Risk-Adjusted Performance

0 of 100

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.

Globalfoundries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Globalfoundries 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 Monolithic Power and Globalfoundries

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

The idea behind Monolithic Power Systems and Globalfoundries 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.