Correlation Between Applied Materials and MACOM Technology
Can any of the company-specific risk be diversified away by investing in both Applied Materials and MACOM Technology 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 Applied Materials and MACOM Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and MACOM Technology Solutions, you can compare the effects of market volatilities on Applied Materials and MACOM Technology 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 Applied Materials with a short position of MACOM Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and MACOM Technology.
Diversification Opportunities for Applied Materials and MACOM Technology
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and MACOM is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol and Applied Materials 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 Applied Materials are associated (or correlated) with MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of Applied Materials i.e., Applied Materials and MACOM Technology go up and down completely randomly.
Pair Corralation between Applied Materials and MACOM Technology
Given the investment horizon of 90 days Applied Materials is expected to generate 1.24 times less return on investment than MACOM Technology. In addition to that, Applied Materials is 1.04 times more volatile than MACOM Technology Solutions. It trades about 0.05 of its total potential returns per unit of risk. MACOM Technology Solutions is currently generating about 0.07 per unit of volatility. If you would invest 6,875 in MACOM Technology Solutions on August 30, 2024 and sell it today you would earn a total of 6,292 from holding MACOM Technology Solutions or generate 91.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. MACOM Technology Solutions
Performance |
| Timeline |
| Applied Materials |
| MACOM Technology Sol |
Applied Materials and MACOM Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and MACOM Technology
The main advantage of trading using opposite Applied Materials and MACOM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, MACOM Technology 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 MACOM Technology will offset losses from the drop in MACOM Technology's long position.| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
| MACOM Technology vs. Power Integrations | MACOM Technology vs. Diodes Incorporated | MACOM Technology vs. Cirrus Logic | MACOM Technology vs. Amkor Technology |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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