Correlation Between Marvell Technology and Renesas Electronics

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

Diversification Opportunities for Marvell Technology and Renesas Electronics

-0.71

Correlation Coefficient

Marvell Technology  Renesas Electronics

Pay attention - limited upside

The 3 months correlation between Marvell and Renesas is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Marvell Technology Group and Renesas Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics Corp 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics Corp has no effect on the direction of Marvell Technology i.e., Marvell Technology and Renesas Electronics go up and down completely randomly.

Pair Corralation between Marvell Technology and Renesas Electronics

Given the investment horizon of 90 days Marvell Technology Group is expected to generate 1.32 times more return on investment than Renesas Electronics. However, Marvell Technology is 1.32 times more volatile than Renesas Electronics Corp. It trades about 0.08 of its potential returns per unit of risk. Renesas Electronics Corp is currently generating about 0.03 per unit of risk. If you would invest  4,074  in Marvell Technology Group on October 5, 2024 and sell it today you would earn a total of  7,282  from holding Marvell Technology Group or generate 178.74% return on investment over 90 days.

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

Marvell Technology Group  vs.  Renesas Electronics Corp

Marvell Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marvell Technology Group are ranked lower than 14 (%) 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.

Renesas Electronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renesas Electronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Marvell Technology and Renesas Electronics

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

The idea behind Marvell Technology Group and Renesas Electronics Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.