Correlation Between Marvell Technology and AXT

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

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

Diversification Opportunities for Marvell Technology and AXT

-0.34

Correlation Coefficient

Marvell Technology  AXT

Very good diversification

The 3 months correlation between Marvell and AXT is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Marvell Technology Group and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT Inc and Marvell Technology 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 Marvell Technology Group are associated (or correlated) with AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of Marvell Technology i.e., Marvell Technology and AXT go up and down completely randomly.

Pair Corralation between Marvell Technology and AXT

Given the investment horizon of 90 days Marvell Technology Group is expected to generate 0.78 times more return on investment than AXT. However, Marvell Technology Group is 1.28 times less risky than AXT. It trades about 0.18 of its potential returns per unit of risk. AXT Inc is currently generating about 0.04 per unit of risk. If you would invest  7,175  in Marvell Technology Group on September 21, 2024 and sell it today you would earn a total of  3,736  from holding Marvell Technology Group or generate 52.07% return on investment over 90 days.

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

Marvell Technology Group  vs.  AXT Inc

Marvell Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marvell Technology Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Marvell Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

AXT Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AXT Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, AXT demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marvell Technology and AXT

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

The idea behind Marvell Technology Group and AXT Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.