Correlation Between MACOM Technology and AGRICULTBK HADR25

Can any of the company-specific risk be diversified away by investing in both MACOM Technology and AGRICULTBK HADR25 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 AGRICULTBK HADR25 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 AGRICULTBK HADR25 YC, you can compare the effects of market volatilities on MACOM Technology and AGRICULTBK HADR25 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 AGRICULTBK HADR25. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and AGRICULTBK HADR25.

Diversification Opportunities for MACOM Technology and AGRICULTBK HADR25

0.86

Correlation Coefficient

MACOM Technology  AGRICULTBK HADR25

Very poor diversification

The 3 months correlation between MACOM and AGRICULTBK is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and AGRICULTBK HADR25 YC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGRICULTBK HADR25 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 AGRICULTBK HADR25. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGRICULTBK HADR25 has no effect on the direction of MACOM Technology i.e., MACOM Technology and AGRICULTBK HADR25 go up and down completely randomly.

Pair Corralation between MACOM Technology and AGRICULTBK HADR25

Assuming the 90 days horizon MACOM Technology Solutions is expected to generate 1.33 times more return on investment than AGRICULTBK HADR25. However, MACOM Technology is 1.33 times more volatile than AGRICULTBK HADR25 YC. It trades about 0.21 of its potential returns per unit of risk. AGRICULTBK HADR25 YC is currently generating about 0.2 per unit of risk. If you would invest  9,150  in MACOM Technology Solutions on September 13, 2024 and sell it today you would earn a total of  3,950  from holding MACOM Technology Solutions or generate 43.17% return on investment over 90 days.

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

MACOM Technology Solutions  vs.  AGRICULTBK HADR25 YC

MACOM Technology Sol

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MACOM Technology reported solid returns over the last few months and may actually be approaching a breakup point.

AGRICULTBK HADR25

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGRICULTBK HADR25 YC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AGRICULTBK HADR25 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MACOM Technology and AGRICULTBK HADR25

The main advantage of trading using opposite MACOM Technology and AGRICULTBK HADR25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology position performs unexpectedly, AGRICULTBK HADR25 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 AGRICULTBK HADR25 will offset losses from the drop in AGRICULTBK HADR25's long position.

The idea behind MACOM Technology Solutions and AGRICULTBK HADR25 YC 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.