Correlation Between Gold Fields and MACOM Technology

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

By analyzing existing cross correlation between Gold Fields Ltd and MACOM Technology Solutions, you can compare the effects of market volatilities on Gold Fields and MACOM Technology 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 Gold Fields with a short position of MACOM Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and MACOM Technology.

Diversification Opportunities for Gold Fields and MACOM Technology

-0.67

Correlation Coefficient

Gold Fields  MACOM Technology

Excellent diversification

The 3 months correlation between Gold and MACOM is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol and Gold Fields 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 Gold Fields Ltd are associated (or correlated) with MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of Gold Fields i.e., Gold Fields and MACOM Technology go up and down completely randomly.

Pair Corralation between Gold Fields and MACOM Technology

Considering the 90-day investment horizon Gold Fields is expected to generate 1.95 times less return on investment than MACOM Technology. In addition to that, Gold Fields is 1.29 times more volatile than MACOM Technology Solutions. It trades about 0.03 of its total potential returns per unit of risk. MACOM Technology Solutions is currently generating about 0.08 per unit of volatility. If you would invest  7,903  in MACOM Technology Solutions on October 4, 2024 and sell it today you would earn a total of  5,040  from holding MACOM Technology Solutions or generate 63.77% return on investment over 90 days.

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

Gold Fields Ltd  vs.  MACOM Technology Solutions

Gold Fields

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Fields Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

MACOM Technology Sol

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, MACOM Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Fields and MACOM Technology

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

The idea behind Gold Fields Ltd and MACOM Technology Solutions 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.