Correlation Between Cree and Diodes Incorporated

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

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

Diversification Opportunities for Cree and Diodes Incorporated

0.0

Correlation Coefficient

Cree  Diodes Incorporated

Pay attention - limited upside

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

Pair Corralation between Cree and Diodes Incorporated

If you would invest  6,798  in Diodes Incorporated on January 24, 2024 and sell it today you would lose (7.00) from holding Diodes Incorporated or give up 0.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Cree Inc  vs.  Diodes Incorporated

Cree Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cree Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Cree is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Diodes Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diodes Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Diodes Incorporated is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cree and Diodes Incorporated

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

The idea behind Cree Inc and Diodes Incorporated 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.