Correlation Between CTS and Diodes Incorporated

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

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

Diversification Opportunities for CTS and Diodes Incorporated

0.6

Correlation Coefficient

CTS  Diodes Incorporated

Poor diversification

The 3 months correlation between CTS and Diodes is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CTS Corp. and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated and CTS 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 CTS Corporation 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 CTS i.e., CTS and Diodes Incorporated go up and down completely randomly.

Pair Corralation between CTS and Diodes Incorporated

Considering the 90-day investment horizon CTS is expected to generate 814.6 times less return on investment than Diodes Incorporated. But when comparing it to its historical volatility, CTS Corporation is 1.46 times less risky than Diodes Incorporated. It trades about 0.0 of its potential returns per unit of risk. Diodes Incorporated is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,871  in Diodes Incorporated on May 6, 2025 and sell it today you would earn a total of  1,020  from holding Diodes Incorporated or generate 26.35% return on investment over 90 days.

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

CTS Corp.  vs.  Diodes Incorporated

CTS Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days CTS Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CTS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Diodes Incorporated

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Diodes Incorporated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTS and Diodes Incorporated

The main advantage of trading using opposite CTS and Diodes Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTS 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 CTS Corporation 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.