Correlation Between MACOM Technology and PFIZER

Can any of the company-specific risk be diversified away by investing in both MACOM Technology and PFIZER 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 PFIZER 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 PFIZER INC 43, you can compare the effects of market volatilities on MACOM Technology and PFIZER 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 PFIZER. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and PFIZER.

Diversification Opportunities for MACOM Technology and PFIZER

-0.54

Correlation Coefficient

MACOM Technology  PFIZER

Excellent diversification

The 3 months correlation between MACOM and PFIZER is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and PFIZER INC 43 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFIZER INC 43 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 PFIZER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PFIZER INC 43 has no effect on the direction of MACOM Technology i.e., MACOM Technology and PFIZER go up and down completely randomly.

Pair Corralation between MACOM Technology and PFIZER

Given the investment horizon of 90 days MACOM Technology Solutions is expected to generate 3.03 times more return on investment than PFIZER. However, MACOM Technology is 3.03 times more volatile than PFIZER INC 43. It trades about 0.09 of its potential returns per unit of risk. PFIZER INC 43 is currently generating about -0.01 per unit of risk. If you would invest  8,617  in MACOM Technology Solutions on October 9, 2024 and sell it today you would earn a total of  4,928  from holding MACOM Technology Solutions or generate 57.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	84.62%
Values	Daily Returns

MACOM Technology Solutions  vs.  PFIZER INC 43

MACOM Technology Sol

Risk-Adjusted Performance

10 of 100

OK

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.

PFIZER INC 43

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PFIZER INC 43 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PFIZER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MACOM Technology and PFIZER

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

The idea behind MACOM Technology Solutions and PFIZER INC 43 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.