Correlation Between Synaptics Incorporated and Diodes Incorporated

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

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

Diversification Opportunities for Synaptics Incorporated and Diodes Incorporated

-0.23

Correlation Coefficient

Synaptics Incorporated  Diodes Incorporated

Very good diversification

The 3 months correlation between Synaptics and Diodes is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Synaptics Incorporated and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated and Synaptics 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 Synaptics Incorporated 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 Synaptics Incorporated i.e., Synaptics Incorporated and Diodes Incorporated go up and down completely randomly.

Pair Corralation between Synaptics Incorporated and Diodes Incorporated

Given the investment horizon of 90 days Synaptics Incorporated is expected to generate 1.09 times more return on investment than Diodes Incorporated. However, Synaptics Incorporated is 1.09 times more volatile than Diodes Incorporated. It trades about 0.04 of its potential returns per unit of risk. Diodes Incorporated is currently generating about -0.02 per unit of risk. If you would invest  7,717  in Synaptics Incorporated on February 10, 2024 and sell it today you would earn a total of  1,449  from holding Synaptics Incorporated or generate 18.78% return on investment over 90 days.

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

Synaptics Incorporated  vs.  Diodes Incorporated

Synaptics Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Synaptics Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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 weak basic indicators, Diodes Incorporated may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Synaptics Incorporated and Diodes Incorporated

The main advantage of trading using opposite Synaptics Incorporated and Diodes Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synaptics Incorporated 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 Synaptics Incorporated 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.