Correlation Between Cirrus Logic and Diodes Incorporated

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

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

Diversification Opportunities for Cirrus Logic and Diodes Incorporated

0.38

Correlation Coefficient

Cirrus Logic  Diodes Incorporated

Weak diversification

The 3 months correlation between Cirrus and Diodes is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cirrus Logic and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated and Cirrus Logic 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 Cirrus Logic are associated (or correlated) with Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of Cirrus Logic i.e., Cirrus Logic and Diodes Incorporated go up and down completely randomly.

Pair Corralation between Cirrus Logic and Diodes Incorporated

Given the investment horizon of 90 days Cirrus Logic is expected to generate 1.01 times more return on investment than Diodes Incorporated. However, Cirrus Logic is 1.01 times more volatile than Diodes Incorporated. It trades about 0.13 of its potential returns per unit of risk. Diodes Incorporated is currently generating about 0.04 per unit of risk. If you would invest  7,216  in Cirrus Logic on February 10, 2024 and sell it today you would earn a total of  3,162  from holding Cirrus Logic or generate 43.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Cirrus Logic  vs.  Diodes Incorporated

Cirrus Logic

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cirrus Logic are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cirrus Logic unveiled solid returns over the last few months and may actually be approaching a breakup point.

Diodes Incorporated

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Diodes Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Diodes Incorporated is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cirrus Logic and Diodes Incorporated

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

The idea behind Cirrus Logic and Diodes Incorporated 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.