Correlation Between Analog Devices and Himax Technologies

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

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

Diversification Opportunities for Analog Devices and Himax Technologies

0.47

Correlation Coefficient

Analog Devices  Himax Technologies

Very weak diversification

The 3 months correlation between Analog and Himax is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Himax Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Himax Technologies and Analog Devices 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 Analog Devices are associated (or correlated) with Himax Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Himax Technologies has no effect on the direction of Analog Devices i.e., Analog Devices and Himax Technologies go up and down completely randomly.

Pair Corralation between Analog Devices and Himax Technologies

Considering the 90-day investment horizon Analog Devices is expected to generate 0.8 times more return on investment than Himax Technologies. However, Analog Devices is 1.25 times less risky than Himax Technologies. It trades about 0.02 of its potential returns per unit of risk. Himax Technologies is currently generating about -0.03 per unit of risk. If you would invest  18,346  in Analog Devices on January 17, 2024 and sell it today you would earn a total of  683.00  from holding Analog Devices or generate 3.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Analog Devices  vs.  Himax Technologies

Analog Devices

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Himax Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Himax Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Analog Devices and Himax Technologies

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

The idea behind Analog Devices and Himax Technologies 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 Anywhere module to track or share privately all of your investments from the convenience of any device.