Correlation Between Analog Devices and Monolithic Power

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

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

Diversification Opportunities for Analog Devices and Monolithic Power

0.94

Correlation Coefficient

Analog Devices  Monolithic Power

Almost no diversification

The 3 months correlation between Analog and Monolithic is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Monolithic Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monolithic Power Systems and Analog Devices 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 Analog Devices are associated (or correlated) with Monolithic Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monolithic Power Systems has no effect on the direction of Analog Devices i.e., Analog Devices and Monolithic Power go up and down completely randomly.

Pair Corralation between Analog Devices and Monolithic Power

Considering the 90-day investment horizon Analog Devices is expected to generate 1.1 times less return on investment than Monolithic Power. But when comparing it to its historical volatility, Analog Devices is 1.47 times less risky than Monolithic Power. It trades about 0.17 of its potential returns per unit of risk. Monolithic Power Systems is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  60,035  in Monolithic Power Systems on May 1, 2025 and sell it today you would earn a total of  12,402  from holding Monolithic Power Systems or generate 20.66% return on investment over 90 days.

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

Analog Devices  vs.  Monolithic Power Systems

Analog Devices

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Analog Devices demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Monolithic Power Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monolithic Power Systems are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Monolithic Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and Monolithic Power

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

The idea behind Analog Devices and Monolithic Power Systems 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.