Correlation Between MACOM Technology and American Homes
Can any of the company-specific risk be diversified away by investing in both MACOM Technology and American Homes 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 MACOM Technology and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MACOM Technology Solutions and American Homes 4, you can compare the effects of market volatilities on MACOM Technology and American Homes 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 MACOM Technology with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and American Homes.
Diversification Opportunities for MACOM Technology and American Homes
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MACOM and American is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 and MACOM Technology 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 MACOM Technology Solutions are associated (or correlated) with American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of MACOM Technology i.e., MACOM Technology and American Homes go up and down completely randomly.
Pair Corralation between MACOM Technology and American Homes
Assuming the 90 days horizon MACOM Technology Solutions is expected to generate 1.94 times more return on investment than American Homes. However, MACOM Technology is 1.94 times more volatile than American Homes 4. It trades about 0.25 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.29 per unit of risk. If you would invest 10,300 in MACOM Technology Solutions on September 1, 2024 and sell it today you would earn a total of 2,200 from holding MACOM Technology Solutions or generate 21.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MACOM Technology Solutions vs. American Homes 4
Performance |
| Timeline |
| MACOM Technology Sol |
| American Homes 4 |
MACOM Technology and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MACOM Technology and American Homes
The main advantage of trading using opposite MACOM Technology and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.The idea behind MACOM Technology Solutions and American Homes 4 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.| American Homes vs. UDR Inc | American Homes vs. Superior Plus Corp | American Homes vs. Origin Agritech | American Homes vs. Identiv |
Check out your portfolio center.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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