Correlation Between Semtech and Supercom

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

By analyzing existing cross correlation between Semtech and Supercom, you can compare the effects of market volatilities on Semtech and Supercom 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 Supercom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semtech and Supercom.

Diversification Opportunities for Semtech and Supercom

-0.02

Correlation Coefficient

Semtech  Supercom

Good diversification

The 3 months correlation between Semtech and Supercom is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and Supercom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supercom 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 Supercom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supercom has no effect on the direction of Semtech i.e., Semtech and Supercom go up and down completely randomly.

Pair Corralation between Semtech and Supercom

Given the investment horizon of 90 days Semtech is expected to generate 0.85 times more return on investment than Supercom. However, Semtech is 1.18 times less risky than Supercom. It trades about 0.19 of its potential returns per unit of risk. Supercom is currently generating about 0.05 per unit of risk. If you would invest  4,163  in Semtech on September 13, 2024 and sell it today you would earn a total of  2,248  from holding Semtech or generate 54.0% return on investment over 90 days.

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

Semtech  vs.  Supercom

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.

Supercom

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Supercom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Supercom sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Semtech and Supercom

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

The idea behind Semtech and Supercom 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.