Correlation Between MACOM Technology and Onto Innovation

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

Diversification Opportunities for MACOM Technology and Onto Innovation

-0.35

Correlation Coefficient

MACOM Technology  Onto Innovation

Very good diversification

The 3 months correlation between MACOM and Onto is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Onto Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onto Innovation 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 Onto Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onto Innovation has no effect on the direction of MACOM Technology i.e., MACOM Technology and Onto Innovation go up and down completely randomly.

Pair Corralation between MACOM Technology and Onto Innovation

Given the investment horizon of 90 days MACOM Technology is expected to generate 2.94 times less return on investment than Onto Innovation. But when comparing it to its historical volatility, MACOM Technology Solutions is 1.11 times less risky than Onto Innovation. It trades about 0.19 of its potential returns per unit of risk. Onto Innovation is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  17,427  in Onto Innovation on October 24, 2024 and sell it today you would earn a total of  4,540  from holding Onto Innovation or generate 26.05% return on investment over 90 days.

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

MACOM Technology Solutions  vs.  Onto Innovation

MACOM Technology Sol

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 10 (%) 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.

Onto Innovation

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Onto Innovation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Onto Innovation may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MACOM Technology and Onto Innovation

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

The idea behind MACOM Technology Solutions and Onto Innovation 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.