Correlation Between Monolithic Power and Navitas Semiconductor

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

By analyzing existing cross correlation between Monolithic Power Systems and Navitas Semiconductor Corp, you can compare the effects of market volatilities on Monolithic Power and Navitas Semiconductor 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 Monolithic Power with a short position of Navitas Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monolithic Power and Navitas Semiconductor.

Diversification Opportunities for Monolithic Power and Navitas Semiconductor

0.21

Correlation Coefficient

Monolithic Power  Navitas Semiconductor

Modest diversification

The 3 months correlation between Monolithic and Navitas is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Monolithic Power Systems and Navitas Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navitas Semiconductor and Monolithic Power 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 Monolithic Power Systems are associated (or correlated) with Navitas Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navitas Semiconductor has no effect on the direction of Monolithic Power i.e., Monolithic Power and Navitas Semiconductor go up and down completely randomly.

Pair Corralation between Monolithic Power and Navitas Semiconductor

Given the investment horizon of 90 days Monolithic Power Systems is expected to generate 0.65 times more return on investment than Navitas Semiconductor. However, Monolithic Power Systems is 1.54 times less risky than Navitas Semiconductor. It trades about -0.22 of its potential returns per unit of risk. Navitas Semiconductor Corp is currently generating about -0.25 per unit of risk. If you would invest  66,811  in Monolithic Power Systems on January 24, 2024 and sell it today you would lose (6,748) from holding Monolithic Power Systems or give up 10.1% of portfolio value over 90 days.

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

Monolithic Power Systems  vs.  Navitas Semiconductor Corp

Monolithic Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monolithic Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Monolithic Power is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Navitas Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navitas Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Monolithic Power and Navitas Semiconductor

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

The idea behind Monolithic Power Systems and Navitas Semiconductor Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.