Correlation Between MACOM Technology and Weebit Nano

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

Diversification Opportunities for MACOM Technology and Weebit Nano

0.75

Correlation Coefficient

MACOM Technology  Weebit Nano

Poor diversification

The 3 months correlation between MACOM and Weebit is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Weebit Nano Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weebit Nano Limited 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 Weebit Nano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weebit Nano Limited has no effect on the direction of MACOM Technology i.e., MACOM Technology and Weebit Nano go up and down completely randomly.

Pair Corralation between MACOM Technology and Weebit Nano

Given the investment horizon of 90 days MACOM Technology Solutions is expected to generate 0.32 times more return on investment than Weebit Nano. However, MACOM Technology Solutions is 3.17 times less risky than Weebit Nano. It trades about 0.3 of its potential returns per unit of risk. Weebit Nano Limited is currently generating about -0.06 per unit of risk. If you would invest  12,323  in MACOM Technology Solutions on September 19, 2024 and sell it today you would earn a total of  1,495  from holding MACOM Technology Solutions or generate 12.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

MACOM Technology Solutions  vs.  Weebit Nano Limited

MACOM Technology Sol

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 13 (%) 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.

Weebit Nano Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Weebit Nano Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Weebit Nano reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MACOM Technology and Weebit Nano

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

The idea behind MACOM Technology Solutions and Weebit Nano Limited 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.