Correlation Between Skyworks Solutions and Alamo

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

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

Diversification Opportunities for Skyworks Solutions and Alamo

0.6

Correlation Coefficient

Skyworks Solutions  Alamo

Poor diversification

The 3 months correlation between Skyworks and Alamo is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Skyworks Solutions and Alamo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Group and Skyworks Solutions 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 Skyworks Solutions are associated (or correlated) with Alamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Group has no effect on the direction of Skyworks Solutions i.e., Skyworks Solutions and Alamo go up and down completely randomly.

Pair Corralation between Skyworks Solutions and Alamo

Given the investment horizon of 90 days Skyworks Solutions is expected to generate 1.51 times more return on investment than Alamo. However, Skyworks Solutions is 1.51 times more volatile than Alamo Group. It trades about -0.05 of its potential returns per unit of risk. Alamo Group is currently generating about -0.09 per unit of risk. If you would invest  10,392  in Skyworks Solutions on February 18, 2024 and sell it today you would lose (1,030) from holding Skyworks Solutions or give up 9.91% of portfolio value over 90 days.

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

Skyworks Solutions  vs.  Alamo Group

Skyworks Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyworks Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Alamo Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alamo Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Skyworks Solutions and Alamo

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

The idea behind Skyworks Solutions and Alamo Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.