Correlation Between MACOM Technology and Renesas Electronics
Can any of the company-specific risk be diversified away by investing in both MACOM Technology and Renesas Electronics 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 Renesas Electronics 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 Renesas Electronics, you can compare the effects of market volatilities on MACOM Technology and Renesas Electronics 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 Renesas Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and Renesas Electronics.
Diversification Opportunities for MACOM Technology and Renesas Electronics
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MACOM and Renesas is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of MACOM Technology i.e., MACOM Technology and Renesas Electronics go up and down completely randomly.
Pair Corralation between MACOM Technology and Renesas Electronics
Given the investment horizon of 90 days MACOM Technology Solutions is expected to generate 0.71 times more return on investment than Renesas Electronics. However, MACOM Technology Solutions is 1.42 times less risky than Renesas Electronics. It trades about 0.18 of its potential returns per unit of risk. Renesas Electronics is currently generating about -0.02 per unit of risk. If you would invest 11,754 in MACOM Technology Solutions on August 29, 2024 and sell it today you would earn a total of 1,710 from holding MACOM Technology Solutions or generate 14.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MACOM Technology Solutions vs. Renesas Electronics
Performance |
| Timeline |
| MACOM Technology Sol |
| Renesas Electronics |
MACOM Technology and Renesas Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MACOM Technology and Renesas Electronics
The main advantage of trading using opposite MACOM Technology and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology position performs unexpectedly, Renesas Electronics 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 Renesas Electronics will offset losses from the drop in Renesas Electronics' long position.The idea behind MACOM Technology Solutions and Renesas Electronics 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.| Renesas Electronics vs. Power Integrations | Renesas Electronics vs. Rohm Co Ltd | Renesas Electronics vs. MACOM Technology Solutions | Renesas Electronics vs. Renesas Electronics Corp |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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