Correlation Between EMCORE and MACOM Technology
Can any of the company-specific risk be diversified away by investing in both EMCORE 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 EMCORE and MACOM Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCORE and MACOM Technology Solutions, you can compare the effects of market volatilities on EMCORE 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 EMCORE with a short position of MACOM Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCORE and MACOM Technology.
Diversification Opportunities for EMCORE and MACOM Technology
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EMCORE and MACOM is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding EMCORE 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 EMCORE 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 EMCORE 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 EMCORE i.e., EMCORE and MACOM Technology go up and down completely randomly.
Pair Corralation between EMCORE and MACOM Technology
Given the investment horizon of 90 days EMCORE is expected to generate 1.77 times more return on investment than MACOM Technology. However, EMCORE is 1.77 times more volatile than MACOM Technology Solutions. It trades about 0.27 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about 0.19 per unit of risk. If you would invest 213.00 in EMCORE on August 28, 2024 and sell it today you would earn a total of 87.00 from holding EMCORE or generate 40.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCORE vs. MACOM Technology Solutions
Performance |
| Timeline |
| EMCORE |
| MACOM Technology Sol |
EMCORE and MACOM Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCORE and MACOM Technology
The main advantage of trading using opposite EMCORE and MACOM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCORE 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.The idea behind EMCORE and MACOM Technology Solutions 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.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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