Correlation Between MACOM Technology and CDW Corp

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Can any of the company-specific risk be diversified away by investing in both MACOM Technology and CDW Corp 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 MACOM Technology and CDW Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MACOM Technology Solutions and CDW Corp, you can compare the effects of market volatilities on MACOM Technology and CDW Corp 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 MACOM Technology with a short position of CDW Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and CDW Corp.

Diversification Opportunities for MACOM Technology and CDW Corp

MACOMCDWDiversified AwayMACOMCDWDiversified Away100%
-0.82
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between MACOM and CDW is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp and MACOM 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 MACOM Technology Solutions are associated (or correlated) with CDW Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corp has no effect on the direction of MACOM Technology i.e., MACOM Technology and CDW Corp go up and down completely randomly.

Pair Corralation between MACOM Technology and CDW Corp

Given the investment horizon of 90 days MACOM Technology Solutions is expected to generate 1.34 times more return on investment than CDW Corp. However, MACOM Technology is 1.34 times more volatile than CDW Corp. It trades about 0.19 of its potential returns per unit of risk. CDW Corp is currently generating about -0.15 per unit of risk. If you would invest  10,001  in MACOM Technology Solutions on September 18, 2024 and sell it today you would earn a total of  3,810  from holding MACOM Technology Solutions or generate 38.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

MACOM Technology Solutions  vs.  CDW Corp

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-10010203040
JavaScript chart by amCharts 3.21.15MTSI CDW
       Timeline  
MACOM Technology Sol 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, MACOM Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec105110115120125130135140
CDW Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CDW 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 stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec180190200210220

MACOM Technology and CDW Corp Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.46-6.34-4.21-2.09-0.03542.224.566.919.2511.59 0.020.040.060.08
JavaScript chart by amCharts 3.21.15MTSI CDW
       Returns  

Pair Trading with MACOM Technology and CDW Corp

The main advantage of trading using opposite MACOM Technology and CDW Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology position performs unexpectedly, CDW Corp 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 CDW Corp will offset losses from the drop in CDW Corp's long position.
The idea behind MACOM Technology Solutions and CDW 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.
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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