Correlation Between MACOM Technology and Tradeweb Markets

Can any of the company-specific risk be diversified away by investing in both MACOM Technology and Tradeweb Markets 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 Tradeweb Markets 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 Tradeweb Markets, you can compare the effects of market volatilities on MACOM Technology and Tradeweb Markets 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 Tradeweb Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and Tradeweb Markets.

Diversification Opportunities for MACOM Technology and Tradeweb Markets

0.73

Correlation Coefficient

MACOM Technology  Tradeweb Markets

Poor diversification

The 3 months correlation between MACOM and Tradeweb is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Tradeweb Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradeweb Markets 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 Tradeweb Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradeweb Markets has no effect on the direction of MACOM Technology i.e., MACOM Technology and Tradeweb Markets go up and down completely randomly.

Pair Corralation between MACOM Technology and Tradeweb Markets

Assuming the 90 days horizon MACOM Technology is expected to generate 18.74 times less return on investment than Tradeweb Markets. In addition to that, MACOM Technology is 1.27 times more volatile than Tradeweb Markets. It trades about 0.01 of its total potential returns per unit of risk. Tradeweb Markets is currently generating about 0.23 per unit of volatility. If you would invest  12,300  in Tradeweb Markets on October 10, 2024 and sell it today you would earn a total of  800.00  from holding Tradeweb Markets or generate 6.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

MACOM Technology Solutions  vs.  Tradeweb Markets

MACOM Technology Sol

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, MACOM Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Tradeweb Markets

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tradeweb Markets may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MACOM Technology and Tradeweb Markets

The main advantage of trading using opposite MACOM Technology and Tradeweb Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology position performs unexpectedly, Tradeweb Markets 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 Tradeweb Markets will offset losses from the drop in Tradeweb Markets' long position.

The idea behind MACOM Technology Solutions and Tradeweb Markets 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.