Correlation Between Monolithic Power and MaxLinear

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

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

Diversification Opportunities for Monolithic Power and MaxLinear

-0.58

Correlation Coefficient

Monolithic Power  MaxLinear

Excellent diversification

The 3 months correlation between Monolithic and MaxLinear is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Monolithic Power Systems and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear and Monolithic Power 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 Monolithic Power Systems are associated (or correlated) with MaxLinear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MaxLinear has no effect on the direction of Monolithic Power i.e., Monolithic Power and MaxLinear go up and down completely randomly.

Pair Corralation between Monolithic Power and MaxLinear

Given the investment horizon of 90 days Monolithic Power Systems is expected to under-perform the MaxLinear. But the stock apears to be less risky and, when comparing its historical volatility, Monolithic Power Systems is 1.17 times less risky than MaxLinear. The stock trades about -0.15 of its potential returns per unit of risk. The MaxLinear is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,434  in MaxLinear on September 13, 2024 and sell it today you would earn a total of  525.00  from holding MaxLinear or generate 36.61% return on investment over 90 days.

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

Monolithic Power Systems  vs.  MaxLinear

Monolithic Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monolithic Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

MaxLinear

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MaxLinear are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, MaxLinear disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monolithic Power and MaxLinear

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

The idea behind Monolithic Power Systems and MaxLinear 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.