Correlation Between MACOM Technology and Cabal Communications

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

Diversification Opportunities for MACOM Technology and Cabal Communications

0.0

Correlation Coefficient

MACOM Technology  Cabal Communications

Pay attention - limited upside

The 3 months correlation between MACOM and Cabal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Cabal Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabal Communications 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 Cabal Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabal Communications has no effect on the direction of MACOM Technology i.e., MACOM Technology and Cabal Communications go up and down completely randomly.

Pair Corralation between MACOM Technology and Cabal Communications

If you would invest  8,638  in MACOM Technology Solutions on October 3, 2024 and sell it today you would earn a total of  4,353  from holding MACOM Technology Solutions or generate 50.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

MACOM Technology Solutions  vs.  Cabal Communications

MACOM Technology Sol

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, MACOM Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Cabal Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabal Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cabal Communications is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MACOM Technology and Cabal Communications

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

The idea behind MACOM Technology Solutions and Cabal Communications 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.