Correlation Between LPL Financial and Marvell Technology

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

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

Diversification Opportunities for LPL Financial and Marvell Technology

0.53

Correlation Coefficient

LPL Financial  Marvell Technology

Very weak diversification

The 3 months correlation between LPL and Marvell is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding LPL Financial Holdings and Marvell Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marvell Technology and LPL Financial 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 LPL Financial Holdings are associated (or correlated) with Marvell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marvell Technology has no effect on the direction of LPL Financial i.e., LPL Financial and Marvell Technology go up and down completely randomly.

Pair Corralation between LPL Financial and Marvell Technology

Assuming the 90 days trading horizon LPL Financial Holdings is expected to generate 0.44 times more return on investment than Marvell Technology. However, LPL Financial Holdings is 2.26 times less risky than Marvell Technology. It trades about -0.04 of its potential returns per unit of risk. Marvell Technology is currently generating about -0.16 per unit of risk. If you would invest  11,513  in LPL Financial Holdings on December 25, 2024 and sell it today you would lose (673.00) from holding LPL Financial Holdings or give up 5.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.61%
Values	Daily Returns

LPL Financial Holdings  vs.  Marvell Technology

LPL Financial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days LPL Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LPL Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Marvell Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marvell Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LPL Financial and Marvell Technology

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

The idea behind LPL Financial Holdings and Marvell Technology 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.