Correlation Between Semtech and Smart Global

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

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

Diversification Opportunities for Semtech and Smart Global

-0.28

Correlation Coefficient

Semtech  Smart Global

Very good diversification

The 3 months correlation between Semtech and Smart is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and Smart Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Global Holdings and Semtech 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 Semtech are associated (or correlated) with Smart Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Global Holdings has no effect on the direction of Semtech i.e., Semtech and Smart Global go up and down completely randomly.

Pair Corralation between Semtech and Smart Global

Given the investment horizon of 90 days Semtech is expected to generate 1.72 times more return on investment than Smart Global. However, Semtech is 1.72 times more volatile than Smart Global Holdings. It trades about 0.19 of its potential returns per unit of risk. Smart Global Holdings is currently generating about 0.11 per unit of risk. If you would invest  4,158  in Semtech on September 3, 2024 and sell it today you would earn a total of  2,246  from holding Semtech or generate 54.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

Semtech  vs.  Smart Global Holdings

Semtech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Semtech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Semtech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Smart Global Holdings

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Smart Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unfluctuating technical and fundamental indicators, Smart Global demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Semtech and Smart Global

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

The idea behind Semtech and Smart Global Holdings 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.