Correlation Between MACOM Technology and LIFENET INSURANCE

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

Diversification Opportunities for MACOM Technology and LIFENET INSURANCE

0.33

Correlation Coefficient

MACOM Technology  LIFENET INSURANCE

Weak diversification

The 3 months correlation between MACOM and LIFENET is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and LIFENET INSURANCE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFENET INSURANCE 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 LIFENET INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFENET INSURANCE has no effect on the direction of MACOM Technology i.e., MACOM Technology and LIFENET INSURANCE go up and down completely randomly.

Pair Corralation between MACOM Technology and LIFENET INSURANCE

Assuming the 90 days horizon MACOM Technology Solutions is expected to generate 1.4 times more return on investment than LIFENET INSURANCE. However, MACOM Technology is 1.4 times more volatile than LIFENET INSURANCE CO. It trades about 0.13 of its potential returns per unit of risk. LIFENET INSURANCE CO is currently generating about 0.03 per unit of risk. If you would invest  10,700  in MACOM Technology Solutions on October 14, 2024 and sell it today you would earn a total of  2,400  from holding MACOM Technology Solutions or generate 22.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MACOM Technology Solutions  vs.  LIFENET INSURANCE CO

MACOM Technology Sol

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MACOM Technology reported solid returns over the last few months and may actually be approaching a breakup point.

LIFENET INSURANCE

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LIFENET INSURANCE CO are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LIFENET INSURANCE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MACOM Technology and LIFENET INSURANCE

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

The idea behind MACOM Technology Solutions and LIFENET INSURANCE CO 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.