Correlation Between MACOM Technology and Diodes Incorporated

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

Diversification Opportunities for MACOM Technology and Diodes Incorporated

0.89

Correlation Coefficient

MACOM Technology  Diodes Incorporated

Very poor diversification

The 3 months correlation between MACOM and Diodes is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated 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 Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of MACOM Technology i.e., MACOM Technology and Diodes Incorporated go up and down completely randomly.

Pair Corralation between MACOM Technology and Diodes Incorporated

Given the investment horizon of 90 days MACOM Technology Solutions is expected to generate 1.33 times more return on investment than Diodes Incorporated. However, MACOM Technology is 1.33 times more volatile than Diodes Incorporated. It trades about -0.11 of its potential returns per unit of risk. Diodes Incorporated is currently generating about -0.2 per unit of risk. If you would invest  12,987  in MACOM Technology Solutions on December 28, 2024 and sell it today you would lose (3,199) from holding MACOM Technology Solutions or give up 24.63% of portfolio value over 90 days.

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

MACOM Technology Solutions  vs.  Diodes Incorporated

MACOM Technology Sol

Risk-Adjusted Performance

Very Weak

Over the last 90 days MACOM Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Diodes Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diodes Incorporated 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with MACOM Technology and Diodes Incorporated

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

The idea behind MACOM Technology Solutions and Diodes Incorporated 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.