Correlation Between MACOM Technology and Nordic Semiconductor
Can any of the company-specific risk be diversified away by investing in both MACOM Technology and Nordic Semiconductor 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 Nordic Semiconductor 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 Nordic Semiconductor ASA, you can compare the effects of market volatilities on MACOM Technology and Nordic Semiconductor 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 Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and Nordic Semiconductor.
Diversification Opportunities for MACOM Technology and Nordic Semiconductor
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MACOM and Nordic is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Nordic Semiconductor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Semiconductor ASA 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 Nordic Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Semiconductor ASA has no effect on the direction of MACOM Technology i.e., MACOM Technology and Nordic Semiconductor go up and down completely randomly.
Pair Corralation between MACOM Technology and Nordic Semiconductor
Given the investment horizon of 90 days MACOM Technology Solutions is expected to generate 0.58 times more return on investment than Nordic Semiconductor. However, MACOM Technology Solutions is 1.71 times less risky than Nordic Semiconductor. It trades about 0.07 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.02 per unit of risk. If you would invest 6,669 in MACOM Technology Solutions on August 27, 2024 and sell it today you would earn a total of 6,781 from holding MACOM Technology Solutions or generate 101.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MACOM Technology Solutions vs. Nordic Semiconductor ASA
Performance |
| Timeline |
| MACOM Technology Sol |
| Nordic Semiconductor ASA |
MACOM Technology and Nordic Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MACOM Technology and Nordic Semiconductor
The main advantage of trading using opposite MACOM Technology and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology position performs unexpectedly, Nordic Semiconductor 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 Nordic Semiconductor will offset losses from the drop in Nordic Semiconductor's long position.The idea behind MACOM Technology Solutions and Nordic Semiconductor ASA 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.| Nordic Semiconductor vs. Synaptics Incorporated | Nordic Semiconductor vs. MACOM Technology Solutions | Nordic Semiconductor vs. Silicon Laboratories | Nordic Semiconductor vs. Power Integrations |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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