Correlation Between MACOM Technology and Weibo Corp

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

Diversification Opportunities for MACOM Technology and Weibo Corp

-0.08

Correlation Coefficient

MACOM Technology  Weibo Corp

Good diversification

The 3 months correlation between MACOM and Weibo is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of MACOM Technology i.e., MACOM Technology and Weibo Corp go up and down completely randomly.

Pair Corralation between MACOM Technology and Weibo Corp

Given the investment horizon of 90 days MACOM Technology Solutions is expected to generate 0.74 times more return on investment than Weibo Corp. However, MACOM Technology Solutions is 1.34 times less risky than Weibo Corp. It trades about 0.07 of its potential returns per unit of risk. Weibo Corp is currently generating about -0.02 per unit of risk. If you would invest  6,312  in MACOM Technology Solutions on October 3, 2024 and sell it today you would earn a total of  6,679  from holding MACOM Technology Solutions or generate 105.81% 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.  Weibo Corp

MACOM Technology Sol

Risk-Adjusted Performance

9 of 100

OK

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

Weibo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with MACOM Technology and Weibo Corp

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

The idea behind MACOM Technology Solutions and Weibo Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.