Correlation Between Power Integrations and EMCORE

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

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

Diversification Opportunities for Power Integrations and EMCORE

0.47

Correlation Coefficient

Power Integrations  EMCORE

Very weak diversification

The 3 months correlation between Power and EMCORE is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Power Integrations and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE and Power Integrations 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 Power Integrations are associated (or correlated) with EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of Power Integrations i.e., Power Integrations and EMCORE go up and down completely randomly.

Pair Corralation between Power Integrations and EMCORE

Given the investment horizon of 90 days Power Integrations is expected to generate 24.39 times less return on investment than EMCORE. But when comparing it to its historical volatility, Power Integrations is 5.3 times less risky than EMCORE. It trades about 0.04 of its potential returns per unit of risk. EMCORE is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  104.00  in EMCORE on August 31, 2024 and sell it today you would earn a total of  194.00  from holding EMCORE or generate 186.54% return on investment over 90 days.

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

Power Integrations  vs.  EMCORE

Power Integrations

Risk-Adjusted Performance

3 of 100

Insignificant

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

EMCORE

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMCORE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal forward-looking signals, EMCORE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Integrations and EMCORE

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

The idea behind Power Integrations and EMCORE 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.