Correlation Between Indie Semiconductor and Applied Opt

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

By analyzing existing cross correlation between indie Semiconductor and Applied Opt, you can compare the effects of market volatilities on Indie Semiconductor and Applied Opt 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 Indie Semiconductor with a short position of Applied Opt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indie Semiconductor and Applied Opt.

Diversification Opportunities for Indie Semiconductor and Applied Opt

0.55

Correlation Coefficient

Indie Semiconductor  Applied Opt

Very weak diversification

The 3 months correlation between Indie and Applied is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding indie Semiconductor and Applied Opt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Opt and Indie Semiconductor 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 indie Semiconductor are associated (or correlated) with Applied Opt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Opt has no effect on the direction of Indie Semiconductor i.e., Indie Semiconductor and Applied Opt go up and down completely randomly.

Pair Corralation between Indie Semiconductor and Applied Opt

Given the investment horizon of 90 days indie Semiconductor is expected to generate 1.51 times more return on investment than Applied Opt. However, Indie Semiconductor is 1.51 times more volatile than Applied Opt. It trades about -0.15 of its potential returns per unit of risk. Applied Opt is currently generating about -0.32 per unit of risk. If you would invest  653.00  in indie Semiconductor on January 20, 2024 and sell it today you would lose (99.00) from holding indie Semiconductor or give up 15.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

indie Semiconductor  vs.  Applied Opt

indie Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days indie Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Applied Opt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Opt has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Indie Semiconductor and Applied Opt

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

The idea behind indie Semiconductor and Applied Opt 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 Stocks Directory module to find actively traded stocks across global markets.