Correlation Between Power Integrations and NVE

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

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

Diversification Opportunities for Power Integrations and NVE

0.73

Correlation Coefficient

Power Integrations  NVE

Poor diversification

The 3 months correlation between Power and NVE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Power Integrations and NVE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVE Corporation and Power Integrations 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 Power Integrations are associated (or correlated) with NVE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVE Corporation has no effect on the direction of Power Integrations i.e., Power Integrations and NVE go up and down completely randomly.

Pair Corralation between Power Integrations and NVE

Given the investment horizon of 90 days Power Integrations is expected to under-perform the NVE. In addition to that, Power Integrations is 1.05 times more volatile than NVE Corporation. It trades about -0.02 of its total potential returns per unit of risk. NVE Corporation is currently generating about 0.03 per unit of volatility. If you would invest  7,001  in NVE Corporation on September 2, 2024 and sell it today you would earn a total of  727.00  from holding NVE Corporation or generate 10.38% return on investment over 90 days.

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

Power Integrations  vs.  NVE Corp.

Power Integrations

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Integrations are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Power Integrations may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NVE Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVE Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, NVE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Power Integrations and NVE

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

The idea behind Power Integrations and NVE Corporation 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.