Correlation Between MACOM Technology and EMCORE

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

Diversification Opportunities for MACOM Technology and EMCORE

0.87

Correlation Coefficient

MACOM Technology  EMCORE

Very poor diversification

The 3 months correlation between MACOM and EMCORE is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE 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 EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of MACOM Technology i.e., MACOM Technology and EMCORE go up and down completely randomly.

Pair Corralation between MACOM Technology and EMCORE

Given the investment horizon of 90 days MACOM Technology is expected to generate 1.7 times less return on investment than EMCORE. But when comparing it to its historical volatility, MACOM Technology Solutions is 1.77 times less risky than EMCORE. It trades about 0.29 of its potential returns per unit of risk. EMCORE is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  209.00  in EMCORE on September 5, 2024 and sell it today you would earn a total of  87.00  from holding EMCORE or generate 41.63% return on investment over 90 days.

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

MACOM Technology Solutions  vs.  EMCORE

MACOM Technology Sol

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, MACOM Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

EMCORE

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMCORE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal forward-looking signals, EMCORE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MACOM Technology and EMCORE

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

The idea behind MACOM Technology Solutions and EMCORE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.