Correlation Between MACOM Technology and Magnite

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

Diversification Opportunities for MACOM Technology and Magnite

0.84

Correlation Coefficient

MACOM Technology  Magnite

Very poor diversification

The 3 months correlation between MACOM and Magnite is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Magnite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnite 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 Magnite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnite has no effect on the direction of MACOM Technology i.e., MACOM Technology and Magnite go up and down completely randomly.

Pair Corralation between MACOM Technology and Magnite

Given the investment horizon of 90 days MACOM Technology is expected to generate 1.04 times less return on investment than Magnite. But when comparing it to its historical volatility, MACOM Technology Solutions is 1.17 times less risky than Magnite. It trades about 0.15 of its potential returns per unit of risk. Magnite is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,207  in Magnite on October 22, 2024 and sell it today you would earn a total of  337.00  from holding Magnite or generate 27.92% 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.  Magnite

MACOM Technology Sol

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 12 (%) 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.

Magnite

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Magnite demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MACOM Technology and Magnite

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

The idea behind MACOM Technology Solutions and Magnite 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.