Correlation Between Navitas Semiconductor and Allegro Microsystems

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

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

Diversification Opportunities for Navitas Semiconductor and Allegro Microsystems

0.61

Correlation Coefficient

Navitas Semiconductor  Allegro Microsystems

Poor diversification

The 3 months correlation between Navitas and Allegro is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Navitas Semiconductor Corp and Allegro Microsystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegro Microsystems and Navitas 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 Navitas Semiconductor Corp are associated (or correlated) with Allegro Microsystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegro Microsystems has no effect on the direction of Navitas Semiconductor i.e., Navitas Semiconductor and Allegro Microsystems go up and down completely randomly.

Pair Corralation between Navitas Semiconductor and Allegro Microsystems

Given the investment horizon of 90 days Navitas Semiconductor Corp is expected to generate 1.84 times more return on investment than Allegro Microsystems. However, Navitas Semiconductor is 1.84 times more volatile than Allegro Microsystems. It trades about -0.02 of its potential returns per unit of risk. Allegro Microsystems is currently generating about -0.05 per unit of risk. If you would invest  302.00  in Navitas Semiconductor Corp on August 30, 2024 and sell it today you would lose (56.00) from holding Navitas Semiconductor Corp or give up 18.54% of portfolio value over 90 days.

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

Navitas Semiconductor Corp  vs.  Allegro Microsystems

Navitas Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navitas Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Allegro Microsystems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allegro Microsystems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Navitas Semiconductor and Allegro Microsystems

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

The idea behind Navitas Semiconductor Corp and Allegro Microsystems 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.