Correlation Between Dolby Laboratories and Maximus

Can any of the company-specific risk be diversified away by investing in both Dolby Laboratories and Maximus 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 Dolby Laboratories and Maximus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dolby Laboratories and Maximus, you can compare the effects of market volatilities on Dolby Laboratories and Maximus 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 Dolby Laboratories with a short position of Maximus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dolby Laboratories and Maximus.

Diversification Opportunities for Dolby Laboratories and Maximus

-0.42

Correlation Coefficient

Dolby Laboratories  Maximus

Very good diversification

The 3 months correlation between Dolby and Maximus is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dolby Laboratories and Maximus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maximus and Dolby Laboratories 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 Dolby Laboratories are associated (or correlated) with Maximus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maximus has no effect on the direction of Dolby Laboratories i.e., Dolby Laboratories and Maximus go up and down completely randomly.

Pair Corralation between Dolby Laboratories and Maximus

Considering the 90-day investment horizon Dolby Laboratories is expected to generate 1.4 times more return on investment than Maximus. However, Dolby Laboratories is 1.4 times more volatile than Maximus. It trades about 0.11 of its potential returns per unit of risk. Maximus is currently generating about -0.25 per unit of risk. If you would invest  7,290  in Dolby Laboratories on September 1, 2024 and sell it today you would earn a total of  542.00  from holding Dolby Laboratories or generate 7.43% return on investment over 90 days.

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

Dolby Laboratories  vs.  Maximus

Dolby Laboratories

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dolby Laboratories are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Dolby Laboratories may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Maximus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maximus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Dolby Laboratories and Maximus

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

The idea behind Dolby Laboratories and Maximus 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.