Correlation Between MACOM Technology and The9

Can any of the company-specific risk be diversified away by investing in both MACOM Technology and The9 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 The9 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 The9 Ltd ADR, you can compare the effects of market volatilities on MACOM Technology and The9 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 The9. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and The9.

Diversification Opportunities for MACOM Technology and The9

0.85

Correlation Coefficient

MACOM Technology  The9

Very poor diversification

The 3 months correlation between MACOM and The9 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and The9 Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The9 Ltd ADR 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 The9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The9 Ltd ADR has no effect on the direction of MACOM Technology i.e., MACOM Technology and The9 go up and down completely randomly.

Pair Corralation between MACOM Technology and The9

Given the investment horizon of 90 days MACOM Technology Solutions is expected to under-perform the The9. But the stock apears to be less risky and, when comparing its historical volatility, MACOM Technology Solutions is 1.42 times less risky than The9. The stock trades about -0.09 of its potential returns per unit of risk. The The9 Ltd ADR is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,571  in The9 Ltd ADR on December 27, 2024 and sell it today you would lose (289.00) from holding The9 Ltd ADR or give up 18.4% 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.  The9 Ltd ADR

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.

The9 Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days The9 Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile 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 current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with MACOM Technology and The9

The main advantage of trading using opposite MACOM Technology and The9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology position performs unexpectedly, The9 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 The9 will offset losses from the drop in The9's long position.

The idea behind MACOM Technology Solutions and The9 Ltd ADR 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.