Correlation Between MACOM Technology and Global Fashion

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

Diversification Opportunities for MACOM Technology and Global Fashion

-0.09

Correlation Coefficient

MACOM Technology  Global Fashion

Good diversification

The 3 months correlation between MACOM and Global is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Global Fashion Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Fashion Group 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 Global Fashion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Fashion Group has no effect on the direction of MACOM Technology i.e., MACOM Technology and Global Fashion go up and down completely randomly.

Pair Corralation between MACOM Technology and Global Fashion

Assuming the 90 days horizon MACOM Technology Solutions is expected to generate 0.45 times more return on investment than Global Fashion. However, MACOM Technology Solutions is 2.24 times less risky than Global Fashion. It trades about -0.15 of its potential returns per unit of risk. Global Fashion Group is currently generating about -0.1 per unit of risk. If you would invest  13,400  in MACOM Technology Solutions on October 4, 2024 and sell it today you would lose (700.00) from holding MACOM Technology Solutions or give up 5.22% of portfolio value over 90 days.

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

MACOM Technology Solutions  vs.  Global Fashion Group

MACOM Technology Sol

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 12 (%) 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.

Global Fashion Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Fashion Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Global Fashion unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MACOM Technology and Global Fashion

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

The idea behind MACOM Technology Solutions and Global Fashion Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.