Correlation Between Synaptics Incorporated and Power Integrations

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

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

Diversification Opportunities for Synaptics Incorporated and Power Integrations

0.84

Correlation Coefficient

Synaptics Incorporated  Power Integrations

Very poor diversification

The 3 months correlation between Synaptics and Power is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Synaptics Incorporated and Power Integrations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Integrations 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 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 Synaptics Incorporated i.e., Synaptics Incorporated and Power Integrations go up and down completely randomly.

Pair Corralation between Synaptics Incorporated and Power Integrations

Given the investment horizon of 90 days Synaptics Incorporated is expected to generate 19.81 times less return on investment than Power Integrations. But when comparing it to its historical volatility, Synaptics Incorporated is 1.27 times less risky than Power Integrations. It trades about 0.01 of its potential returns per unit of risk. Power Integrations is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,912  in Power Integrations on February 10, 2024 and sell it today you would earn a total of  822.00  from holding Power Integrations or generate 11.89% return on investment over 90 days.

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

Synaptics Incorporated  vs.  Power Integrations

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.

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 Synaptics Incorporated and Power Integrations

The main advantage of trading using opposite Synaptics Incorporated and Power Integrations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synaptics Incorporated 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 Synaptics Incorporated 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.