Correlation Between Trimble and Monolithic Power

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

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

Diversification Opportunities for Trimble and Monolithic Power

0.83

Correlation Coefficient

Trimble  Monolithic Power

Very poor diversification

The 3 months correlation between Trimble and Monolithic is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Trimble 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 Trimble 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 Trimble 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 Trimble i.e., Trimble and Monolithic Power go up and down completely randomly.

Pair Corralation between Trimble and Monolithic Power

Given the investment horizon of 90 days Trimble is expected to generate 0.48 times more return on investment than Monolithic Power. However, Trimble is 2.09 times less risky than Monolithic Power. It trades about 0.4 of its potential returns per unit of risk. Monolithic Power Systems is currently generating about 0.13 per unit of risk. If you would invest  6,254  in Trimble on May 1, 2025 and sell it today you would earn a total of  2,215  from holding Trimble or generate 35.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Trimble  vs.  Monolithic Power Systems

Trimble

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Trimble sustained 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 Trimble and Monolithic Power

The main advantage of trading using opposite Trimble and Monolithic Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trimble 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 Trimble 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.