Correlation Between Photronics and Cohu

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

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

Diversification Opportunities for Photronics and Cohu

0.71

Correlation Coefficient

Photronics  Cohu

Poor diversification

The 3 months correlation between Photronics and Cohu is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Photronics and Cohu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohu Inc and Photronics 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 Photronics 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 Photronics i.e., Photronics and Cohu go up and down completely randomly.

Pair Corralation between Photronics and Cohu

Given the investment horizon of 90 days Photronics is expected to generate 1.12 times less return on investment than Cohu. But when comparing it to its historical volatility, Photronics is 1.28 times less risky than Cohu. It trades about 0.04 of its potential returns per unit of risk. Cohu Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,528  in Cohu Inc on September 2, 2024 and sell it today you would earn a total of  112.00  from holding Cohu Inc or generate 4.43% return on investment over 90 days.

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

Photronics  vs.  Cohu Inc

Photronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Photronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Photronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cohu Inc

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Photronics and Cohu

The main advantage of trading using opposite Photronics and Cohu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Photronics 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 Photronics 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.