Correlation Between Marvell Technology and Monolithic Power

Can any of the company-specific risk be diversified away by investing in both Marvell Technology and Monolithic Power 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 Monolithic Power 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 Monolithic Power Systems, you can compare the effects of market volatilities on Marvell Technology and Monolithic Power 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 Monolithic Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marvell Technology and Monolithic Power.

Diversification Opportunities for Marvell Technology and Monolithic Power

0.26

Correlation Coefficient

Marvell Technology  Monolithic Power

Modest diversification

The 3 months correlation between Marvell and Monolithic is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Marvell Technology Group and Monolithic Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monolithic Power Systems 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 Monolithic Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monolithic Power Systems has no effect on the direction of Marvell Technology i.e., Marvell Technology and Monolithic Power go up and down completely randomly.

Pair Corralation between Marvell Technology and Monolithic Power

Given the investment horizon of 90 days Marvell Technology Group is expected to generate 1.07 times more return on investment than Monolithic Power. However, Marvell Technology is 1.07 times more volatile than Monolithic Power Systems. It trades about 0.06 of its potential returns per unit of risk. Monolithic Power Systems is currently generating about 0.04 per unit of risk. If you would invest  5,603  in Marvell Technology Group on December 2, 2024 and sell it today you would earn a total of  3,579  from holding Marvell Technology Group or generate 63.88% return on investment over 90 days.

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

Marvell Technology Group  vs.  Monolithic Power Systems

Marvell Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marvell Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Marvell Technology is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Monolithic Power Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monolithic Power Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Monolithic Power may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Marvell Technology and Monolithic Power

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

The idea behind Marvell Technology Group and Monolithic Power Systems 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.