Correlation Between Agere Systems and Analog Devices

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Can any of the company-specific risk be diversified away by investing in both Agere Systems and Analog Devices 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 Agere Systems and Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Agere Systems and Analog Devices, you can compare the effects of market volatilities on Agere Systems and Analog Devices 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 Agere Systems with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agere Systems and Analog Devices.

Diversification Opportunities for Agere Systems and Analog Devices

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Agere and Analog is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Agere Systems and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Agere Systems 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 Agere Systems are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Agere Systems i.e., Agere Systems and Analog Devices go up and down completely randomly.

Pair Corralation between Agere Systems and Analog Devices

If you would invest  18,818  in Analog Devices on December 29, 2023 and sell it today you would earn a total of  515.00  from holding Analog Devices or generate 2.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Agere Systems  vs.  Analog Devices

 Performance 
       Timeline  
Agere Systems 

Risk-Adjusted Performance

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Over the last 90 days Agere Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Agere Systems is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Analog Devices 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Agere Systems and Analog Devices Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Agere Systems and Analog Devices

The main advantage of trading using opposite Agere Systems and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agere Systems position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.
The idea behind Agere Systems and Analog Devices 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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