Correlation Between SunPower and Monolithic Power
Can any of the company-specific risk be diversified away by investing in both SunPower and Monolithic Power 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 SunPower and Monolithic Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SunPower and Monolithic Power Systems, you can compare the effects of market volatilities on SunPower and Monolithic Power 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 SunPower with a short position of Monolithic Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of SunPower and Monolithic Power.
Diversification Opportunities for SunPower and Monolithic Power
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SunPower and Monolithic is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SunPower and Monolithic Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monolithic Power Systems and SunPower 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 SunPower are associated (or correlated) with Monolithic Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monolithic Power Systems has no effect on the direction of SunPower i.e., SunPower and Monolithic Power go up and down completely randomly.
Pair Corralation between SunPower and Monolithic Power
Given the investment horizon of 90 days SunPower is expected to under-perform the Monolithic Power. In addition to that, SunPower is 1.38 times more volatile than Monolithic Power Systems. It trades about -0.1 of its total potential returns per unit of risk. Monolithic Power Systems is currently generating about 0.07 per unit of volatility. If you would invest 68,132 in Monolithic Power Systems on February 7, 2024 and sell it today you would earn a total of 2,590 from holding Monolithic Power Systems or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
SunPower vs. Monolithic Power Systems
Performance |
| Timeline |
| SunPower |
| Monolithic Power Systems |
SunPower and Monolithic Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SunPower and Monolithic Power
The main advantage of trading using opposite SunPower and Monolithic Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SunPower position performs unexpectedly, Monolithic Power 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 Monolithic Power will offset losses from the drop in Monolithic Power's long position.The idea behind SunPower and Monolithic Power Systems 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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