Correlation Between MACOM Technology and SGH Old

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

Diversification Opportunities for MACOM Technology and SGH Old

-0.73

Correlation Coefficient

MACOM Technology  SGH Old

Pay attention - limited upside

The 3 months correlation between MACOM and SGH is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and SGH Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGH Old 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 SGH Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGH Old has no effect on the direction of MACOM Technology i.e., MACOM Technology and SGH Old go up and down completely randomly.

Pair Corralation between MACOM Technology and SGH Old

Given the investment horizon of 90 days MACOM Technology Solutions is expected to generate 0.6 times more return on investment than SGH Old. However, MACOM Technology Solutions is 1.66 times less risky than SGH Old. It trades about 0.08 of its potential returns per unit of risk. SGH Old is currently generating about 0.03 per unit of risk. If you would invest  6,599  in MACOM Technology Solutions on October 25, 2024 and sell it today you would earn a total of  8,138  from holding MACOM Technology Solutions or generate 123.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.82%
Values	Daily Returns

MACOM Technology Solutions  vs.  SGH Old

MACOM Technology Sol

Risk-Adjusted Performance

9 of 100

Good

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 inconsistent basic indicators, MACOM Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

SGH Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGH Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, SGH Old is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with MACOM Technology and SGH Old

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

The idea behind MACOM Technology Solutions and SGH Old 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.