Correlation Between MACOM Technology and TFS FINANCIAL

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

Diversification Opportunities for MACOM Technology and TFS FINANCIAL

0.85

Correlation Coefficient

MACOM Technology  TFS FINANCIAL

Very poor diversification

The 3 months correlation between MACOM and TFS is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and TFS FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFS FINANCIAL 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 TFS FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFS FINANCIAL has no effect on the direction of MACOM Technology i.e., MACOM Technology and TFS FINANCIAL go up and down completely randomly.

Pair Corralation between MACOM Technology and TFS FINANCIAL

Assuming the 90 days horizon MACOM Technology Solutions is expected to generate 1.61 times more return on investment than TFS FINANCIAL. However, MACOM Technology is 1.61 times more volatile than TFS FINANCIAL. It trades about 0.06 of its potential returns per unit of risk. TFS FINANCIAL is currently generating about -0.21 per unit of risk. If you would invest  12,500  in MACOM Technology Solutions on September 22, 2024 and sell it today you would earn a total of  300.00  from holding MACOM Technology Solutions or generate 2.4% 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.  TFS FINANCIAL

MACOM Technology Sol

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 13 (%) 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.

TFS FINANCIAL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TFS FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MACOM Technology and TFS FINANCIAL

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

The idea behind MACOM Technology Solutions and TFS FINANCIAL 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.