Correlation Between Diodes Incorporated and Steel Connect

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

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

Diversification Opportunities for Diodes Incorporated and Steel Connect

0.72

Correlation Coefficient

Diodes Incorporated  Steel Connect

Poor diversification

The 3 months correlation between Diodes and Steel is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Diodes Incorporated and Steel Connect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Connect and Diodes Incorporated 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 Diodes Incorporated are associated (or correlated) with Steel Connect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Connect has no effect on the direction of Diodes Incorporated i.e., Diodes Incorporated and Steel Connect go up and down completely randomly.

Pair Corralation between Diodes Incorporated and Steel Connect

Given the investment horizon of 90 days Diodes Incorporated is expected to generate 1.42 times more return on investment than Steel Connect. However, Diodes Incorporated is 1.42 times more volatile than Steel Connect. It trades about 0.01 of its potential returns per unit of risk. Steel Connect is currently generating about -0.18 per unit of risk. If you would invest  7,400  in Diodes Incorporated on February 29, 2024 and sell it today you would lose (18.00) from holding Diodes Incorporated or give up 0.24% of portfolio value over 90 days.

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

Diodes Incorporated  vs.  Steel Connect

Diodes Incorporated

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Diodes Incorporated may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Steel Connect

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Connect are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Steel Connect displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diodes Incorporated and Steel Connect

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

The idea behind Diodes Incorporated and Steel Connect 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.