Correlation Between Cirrus Logic and Power Integrations

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

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

Diversification Opportunities for Cirrus Logic and Power Integrations

0.67

Correlation Coefficient

Cirrus Logic  Power Integrations

Poor diversification

The 3 months correlation between Cirrus and Power is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cirrus Logic and Power Integrations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Integrations 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 Power Integrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Integrations has no effect on the direction of Cirrus Logic i.e., Cirrus Logic and Power Integrations go up and down completely randomly.

Pair Corralation between Cirrus Logic and Power Integrations

Given the investment horizon of 90 days Cirrus Logic is expected to generate 0.94 times more return on investment than Power Integrations. However, Cirrus Logic is 1.06 times less risky than Power Integrations. It trades about 0.09 of its potential returns per unit of risk. Power Integrations is currently generating about 0.0 per unit of risk. If you would invest  9,214  in Cirrus Logic on February 10, 2024 and sell it today you would earn a total of  1,164  from holding Cirrus Logic or generate 12.63% return on investment over 90 days.

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

Cirrus Logic  vs.  Power Integrations

Cirrus Logic

Risk-Adjusted Performance

7 of 100

OK

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.

Power Integrations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Integrations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Power Integrations is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Cirrus Logic and Power Integrations

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

The idea behind Cirrus Logic and Power Integrations 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.