Correlation Between Macmahon Holdings and Analog Devices

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

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

Diversification Opportunities for Macmahon Holdings and Analog Devices

0.01

Correlation Coefficient

Macmahon Holdings  Analog Devices

Significant diversification

The 3 months correlation between Macmahon and Analog is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Macmahon Holdings Limited and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Macmahon Holdings 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 Macmahon Holdings Limited are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Macmahon Holdings i.e., Macmahon Holdings and Analog Devices go up and down completely randomly.

Pair Corralation between Macmahon Holdings and Analog Devices

Assuming the 90 days horizon Macmahon Holdings Limited is expected to generate 2.26 times more return on investment than Analog Devices. However, Macmahon Holdings is 2.26 times more volatile than Analog Devices. It trades about 0.14 of its potential returns per unit of risk. Analog Devices is currently generating about 0.03 per unit of risk. If you would invest  18.00  in Macmahon Holdings Limited on September 6, 2024 and sell it today you would earn a total of  7.00  from holding Macmahon Holdings Limited or generate 38.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Macmahon Holdings Limited  vs.  Analog Devices

Macmahon Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Macmahon Holdings Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Macmahon Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Analog Devices

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Macmahon Holdings and Analog Devices

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

The idea behind Macmahon Holdings Limited and Analog Devices 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.