Correlation Between Monolithic Power and SunPower
Can any of the company-specific risk be diversified away by investing in both Monolithic Power and SunPower 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 Monolithic Power and SunPower into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monolithic Power Systems and SunPower, you can compare the effects of market volatilities on Monolithic Power and SunPower 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 Monolithic Power with a short position of SunPower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monolithic Power and SunPower.
Diversification Opportunities for Monolithic Power and SunPower
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Monolithic and SunPower is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Monolithic Power Systems and SunPower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunPower and Monolithic Power 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 Monolithic Power Systems are associated (or correlated) with SunPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunPower has no effect on the direction of Monolithic Power i.e., Monolithic Power and SunPower go up and down completely randomly.
Pair Corralation between Monolithic Power and SunPower
Given the investment horizon of 90 days Monolithic Power Systems is expected to generate 0.45 times more return on investment than SunPower. However, Monolithic Power Systems is 2.22 times less risky than SunPower. It trades about -0.09 of its potential returns per unit of risk. SunPower is currently generating about -0.09 per unit of risk. If you would invest 70,929 in Monolithic Power Systems on December 29, 2023 and sell it today you would lose (3,615) from holding Monolithic Power Systems or give up 5.1% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Monolithic Power Systems vs. SunPower
Performance |
Timeline |
Monolithic Power Systems |
SunPower |
Monolithic Power and SunPower Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Monolithic Power and SunPower
The main advantage of trading using opposite Monolithic Power and SunPower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monolithic Power position performs unexpectedly, SunPower 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 SunPower will offset losses from the drop in SunPower's long position.Monolithic Power vs. Diodes Incorporated | Monolithic Power vs. Daqo New Energy | Monolithic Power vs. MagnaChip Semiconductor | Monolithic Power vs. Nano Labs |
SunPower vs. Diodes Incorporated | SunPower vs. Daqo New Energy | SunPower vs. MagnaChip Semiconductor | SunPower vs. Nano Labs |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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