Correlation Between Monolithic Power and Power Integrations

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

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

Diversification Opportunities for Monolithic Power and Power Integrations

-0.7

Correlation Coefficient

Monolithic Power  Power Integrations

Excellent diversification

The 3 months correlation between Monolithic and Power is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Monolithic Power Systems and Power Integrations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Integrations and Monolithic Power 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 Monolithic Power Systems are associated (or correlated) with Power Integrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Integrations has no effect on the direction of Monolithic Power i.e., Monolithic Power and Power Integrations go up and down completely randomly.

Pair Corralation between Monolithic Power and Power Integrations

Given the investment horizon of 90 days Monolithic Power Systems is expected to generate 0.67 times more return on investment than Power Integrations. However, Monolithic Power Systems is 1.49 times less risky than Power Integrations. It trades about 0.19 of its potential returns per unit of risk. Power Integrations is currently generating about -0.04 per unit of risk. If you would invest  72,349  in Monolithic Power Systems on July 20, 2025 and sell it today you would earn a total of  28,116  from holding Monolithic Power Systems or generate 38.86% return on investment over 90 days.

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

Monolithic Power Systems  vs.  Power Integrations

Monolithic Power Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monolithic Power Systems are ranked lower than 15 (%) 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.

Power Integrations

Risk-Adjusted Performance

Weakest

Over the last 90 days Power Integrations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Monolithic Power and Power Integrations

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

The idea behind Monolithic Power Systems and Power Integrations 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.