Correlation Between MACOM Technology and Northern Data
Can any of the company-specific risk be diversified away by investing in both MACOM Technology and Northern Data 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 Northern Data 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 Northern Data AG, you can compare the effects of market volatilities on MACOM Technology and Northern Data 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 Northern Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and Northern Data.
Diversification Opportunities for MACOM Technology and Northern Data
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MACOM and Northern is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Northern Data AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Data AG 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 Northern Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Data AG has no effect on the direction of MACOM Technology i.e., MACOM Technology and Northern Data go up and down completely randomly.
Pair Corralation between MACOM Technology and Northern Data
Assuming the 90 days horizon MACOM Technology is expected to generate 9.02 times less return on investment than Northern Data. But when comparing it to its historical volatility, MACOM Technology Solutions is 2.2 times less risky than Northern Data. It trades about 0.07 of its potential returns per unit of risk. Northern Data AG is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 3,955 in Northern Data AG on October 11, 2024 and sell it today you would earn a total of 990.00 from holding Northern Data AG or generate 25.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MACOM Technology Solutions vs. Northern Data AG
Performance |
| Timeline |
| MACOM Technology Sol |
| Northern Data AG |
MACOM Technology and Northern Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MACOM Technology and Northern Data
The main advantage of trading using opposite MACOM Technology and Northern Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology position performs unexpectedly, Northern Data 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 Northern Data will offset losses from the drop in Northern Data's long position.| MACOM Technology vs. Perseus Mining Limited | MACOM Technology vs. Calibre Mining Corp | MACOM Technology vs. MAGNUM MINING EXP | MACOM Technology vs. Altair Engineering |
| Northern Data vs. RELIANCE STEEL AL | Northern Data vs. NEW MILLENNIUM IRON | Northern Data vs. VELA TECHNOLPLC LS 0001 | Northern Data vs. STEEL DYNAMICS |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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