Correlation Between MACOM Technology and Bank of America
Can any of the company-specific risk be diversified away by investing in both MACOM Technology and Bank of America 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 Bank of America 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 Verizon Communications, you can compare the effects of market volatilities on MACOM Technology and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and Bank of America.
Diversification Opportunities for MACOM Technology and Bank of America
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MACOM and Bank is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of MACOM Technology i.e., MACOM Technology and Bank of America go up and down completely randomly.
Pair Corralation between MACOM Technology and Bank of America
Assuming the 90 days horizon MACOM Technology Solutions is expected to under-perform the Bank of America. In addition to that, MACOM Technology is 2.88 times more volatile than Verizon Communications. It trades about -0.05 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.08 per unit of volatility. If you would invest 3,751 in Verizon Communications on November 7, 2024 and sell it today you would earn a total of 73.00 from holding Verizon Communications or generate 1.95% 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. Verizon Communications
Performance |
| Timeline |
| MACOM Technology Sol |
| Verizon Communications |
MACOM Technology and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MACOM Technology and Bank of America
The main advantage of trading using opposite MACOM Technology and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| MACOM Technology vs. Take Two Interactive Software | MACOM Technology vs. PSI Software AG | MACOM Technology vs. MAG SILVER | MACOM Technology vs. Perseus Mining Limited |
| Bank of America vs. ON SEMICONDUCTOR | Bank of America vs. KENEDIX OFFICE INV | Bank of America vs. PLAYMATES TOYS | Bank of America vs. CENTURIA OFFICE REIT |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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