Correlation Between Skyworks Solutions and Advanced Energy

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

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

Diversification Opportunities for Skyworks Solutions and Advanced Energy

-0.65

Correlation Coefficient

Skyworks Solutions  Advanced Energy

Excellent diversification

The 3 months correlation between Skyworks and Advanced is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Skyworks Solutions and Advanced Energy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Indu and Skyworks Solutions 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 Skyworks Solutions are associated (or correlated) with Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Indu has no effect on the direction of Skyworks Solutions i.e., Skyworks Solutions and Advanced Energy go up and down completely randomly.

Pair Corralation between Skyworks Solutions and Advanced Energy

Given the investment horizon of 90 days Skyworks Solutions is expected to under-perform the Advanced Energy. In addition to that, Skyworks Solutions is 1.06 times more volatile than Advanced Energy Industries. It trades about -0.11 of its total potential returns per unit of risk. Advanced Energy Industries is currently generating about 0.14 per unit of volatility. If you would invest  9,875  in Advanced Energy Industries on September 3, 2024 and sell it today you would earn a total of  1,629  from holding Advanced Energy Industries or generate 16.5% return on investment over 90 days.

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

Skyworks Solutions  vs.  Advanced Energy Industries

Skyworks Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyworks Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Advanced Energy Indu

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Advanced Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Skyworks Solutions and Advanced Energy

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

The idea behind Skyworks Solutions and Advanced Energy Industries 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.