Correlation Between Ambarella and SemiLEDS

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

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

Diversification Opportunities for Ambarella and SemiLEDS

-0.19

Correlation Coefficient

Ambarella  SemiLEDS

Good diversification

The 3 months correlation between Ambarella and SemiLEDS is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ambarella and SemiLEDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SemiLEDS and Ambarella 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 Ambarella are associated (or correlated) with SemiLEDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SemiLEDS has no effect on the direction of Ambarella i.e., Ambarella and SemiLEDS go up and down completely randomly.

Pair Corralation between Ambarella and SemiLEDS

Given the investment horizon of 90 days Ambarella is expected to generate 0.81 times more return on investment than SemiLEDS. However, Ambarella is 1.23 times less risky than SemiLEDS. It trades about 0.17 of its potential returns per unit of risk. SemiLEDS is currently generating about -0.04 per unit of risk. If you would invest  4,714  in Ambarella on April 29, 2025 and sell it today you would earn a total of  2,130  from holding Ambarella or generate 45.18% return on investment over 90 days.

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

Ambarella  vs.  SemiLEDS

Ambarella

Risk-Adjusted Performance

Good

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

SemiLEDS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ambarella and SemiLEDS

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

The idea behind Ambarella and SemiLEDS 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.