Correlation Between Smart Global and Diodes Incorporated

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

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

Diversification Opportunities for Smart Global and Diodes Incorporated

-0.09

Correlation Coefficient

Smart Global  Diodes Incorporated

Good diversification

The 3 months correlation between Smart and Diodes is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Smart Global Holdings and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated and Smart Global 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 Smart Global Holdings 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 Smart Global i.e., Smart Global and Diodes Incorporated go up and down completely randomly.

Pair Corralation between Smart Global and Diodes Incorporated

Considering the 90-day investment horizon Smart Global Holdings is expected to under-perform the Diodes Incorporated. In addition to that, Smart Global is 1.82 times more volatile than Diodes Incorporated. It trades about -0.02 of its total potential returns per unit of risk. Diodes Incorporated is currently generating about 0.06 per unit of volatility. If you would invest  6,745  in Diodes Incorporated on February 4, 2024 and sell it today you would earn a total of  534.00  from holding Diodes Incorporated or generate 7.92% return on investment over 90 days.

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

Smart Global Holdings  vs.  Diodes Incorporated

Smart Global Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Smart Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Diodes Incorporated

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Diodes Incorporated may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Smart Global and Diodes Incorporated

The main advantage of trading using opposite Smart Global and Diodes Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Global 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 Smart Global Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..