Correlation Between IB Acquisition and MACOM Technology

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

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

Diversification Opportunities for IB Acquisition and MACOM Technology

0.23

Correlation Coefficient

IB Acquisition  MACOM Technology

Modest diversification

The 3 months correlation between IBACR and MACOM is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding IB Acquisition Corp 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 IB Acquisition 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 IB Acquisition Corp 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 IB Acquisition i.e., IB Acquisition and MACOM Technology go up and down completely randomly.

Pair Corralation between IB Acquisition and MACOM Technology

Assuming the 90 days horizon IB Acquisition Corp is expected to generate 5.51 times more return on investment than MACOM Technology. However, IB Acquisition is 5.51 times more volatile than MACOM Technology Solutions. It trades about 0.05 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about 0.13 per unit of risk. If you would invest  7.01  in IB Acquisition Corp on October 25, 2024 and sell it today you would lose (1.00) from holding IB Acquisition Corp or give up 14.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.27%
Values	Daily Returns

IB Acquisition Corp  vs.  MACOM Technology Solutions

IB Acquisition Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IB Acquisition Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, IB Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

MACOM Technology Sol

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 9 (%) 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 IB Acquisition and MACOM Technology

The main advantage of trading using opposite IB Acquisition and MACOM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IB Acquisition 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 IB Acquisition Corp 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.