Correlation Between Marvell Technology and ECGI Holdings
Can any of the company-specific risk be diversified away by investing in both Marvell Technology and ECGI Holdings 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 Marvell Technology and ECGI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marvell Technology Group and ECGI Holdings, you can compare the effects of market volatilities on Marvell Technology and ECGI Holdings 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 Marvell Technology with a short position of ECGI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marvell Technology and ECGI Holdings.
Diversification Opportunities for Marvell Technology and ECGI Holdings
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Marvell and ECGI is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Marvell Technology Group and ECGI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECGI Holdings and Marvell 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 Marvell Technology Group are associated (or correlated) with ECGI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECGI Holdings has no effect on the direction of Marvell Technology i.e., Marvell Technology and ECGI Holdings go up and down completely randomly.
Pair Corralation between Marvell Technology and ECGI Holdings
Given the investment horizon of 90 days Marvell Technology is expected to generate 5.41 times less return on investment than ECGI Holdings. But when comparing it to its historical volatility, Marvell Technology Group is 4.92 times less risky than ECGI Holdings. It trades about 0.2 of its potential returns per unit of risk. ECGI Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 0.14 in ECGI Holdings on August 28, 2024 and sell it today you would earn a total of 0.07 from holding ECGI Holdings or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Marvell Technology Group vs. ECGI Holdings
Performance |
| Timeline |
| Marvell Technology |
| ECGI Holdings |
Marvell Technology and ECGI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marvell Technology and ECGI Holdings
The main advantage of trading using opposite Marvell Technology and ECGI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marvell Technology position performs unexpectedly, ECGI Holdings 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 ECGI Holdings will offset losses from the drop in ECGI Holdings' long position.The idea behind Marvell Technology Group and ECGI Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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