Correlation Between MACOM Technology and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both MACOM Technology and STMicroelectronics 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 STMicroelectronics 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 STMicroelectronics NV, you can compare the effects of market volatilities on MACOM Technology and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and STMicroelectronics.
Diversification Opportunities for MACOM Technology and STMicroelectronics
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MACOM and STMicroelectronics is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of MACOM Technology i.e., MACOM Technology and STMicroelectronics go up and down completely randomly.
Pair Corralation between MACOM Technology and STMicroelectronics
Given the investment horizon of 90 days MACOM Technology Solutions is expected to generate 1.02 times more return on investment than STMicroelectronics. However, MACOM Technology is 1.02 times more volatile than STMicroelectronics NV. It trades about 0.18 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.08 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MACOM Technology Solutions vs. STMicroelectronics NV
Performance |
| Timeline |
| MACOM Technology Sol |
| STMicroelectronics |
MACOM Technology and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MACOM Technology and STMicroelectronics
The main advantage of trading using opposite MACOM Technology and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.The idea behind MACOM Technology Solutions and STMicroelectronics NV 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.| STMicroelectronics vs. Silicon Laboratories | STMicroelectronics vs. Power Integrations | STMicroelectronics vs. Diodes Incorporated | STMicroelectronics vs. MaxLinear |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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