Correlation Between STMicroelectronics and MACOM Technology
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics 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 STMicroelectronics and MACOM Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and MACOM Technology Solutions, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of MACOM Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and MACOM Technology.
Diversification Opportunities for STMicroelectronics and MACOM Technology
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between STMicroelectronics and MACOM is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV 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 STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and MACOM Technology go up and down completely randomly.
Pair Corralation between STMicroelectronics and MACOM Technology
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the MACOM Technology. In addition to that, STMicroelectronics is 1.28 times more volatile than MACOM Technology Solutions. It trades about -0.02 of its total potential returns per unit of risk. MACOM Technology Solutions is currently generating about 0.07 per unit of volatility. If you would invest 6,764 in MACOM Technology Solutions on August 25, 2024 and sell it today you would earn a total of 6,686 from holding MACOM Technology Solutions or generate 98.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. MACOM Technology Solutions
Performance |
| Timeline |
| STMicroelectronics |
| MACOM Technology Sol |
STMicroelectronics and MACOM Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and MACOM Technology
The main advantage of trading using opposite STMicroelectronics and MACOM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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.| STMicroelectronics vs. Silicon Laboratories | STMicroelectronics vs. Power Integrations | STMicroelectronics vs. Diodes Incorporated | STMicroelectronics vs. MaxLinear |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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