Correlation Between MaxLinear and Diodes Incorporated

Can any of the company-specific risk be diversified away by investing in both MaxLinear and Diodes Incorporated 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 MaxLinear and Diodes Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MaxLinear and Diodes Incorporated, you can compare the effects of market volatilities on MaxLinear and Diodes Incorporated 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 MaxLinear with a short position of Diodes Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of MaxLinear and Diodes Incorporated.

Diversification Opportunities for MaxLinear and Diodes Incorporated

0.91

Correlation Coefficient

MaxLinear  Diodes Incorporated

Almost no diversification

The 3 months correlation between MaxLinear and Diodes is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding MaxLinear and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated and MaxLinear 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 MaxLinear are associated (or correlated) with Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of MaxLinear i.e., MaxLinear and Diodes Incorporated go up and down completely randomly.

Pair Corralation between MaxLinear and Diodes Incorporated

Considering the 90-day investment horizon MaxLinear is expected to under-perform the Diodes Incorporated. In addition to that, MaxLinear is 2.18 times more volatile than Diodes Incorporated. It trades about -0.15 of its total potential returns per unit of risk. Diodes Incorporated is currently generating about -0.17 per unit of volatility. If you would invest  6,153  in Diodes Incorporated on December 29, 2024 and sell it today you would lose (1,530) from holding Diodes Incorporated or give up 24.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

MaxLinear  vs.  Diodes Incorporated

MaxLinear

Risk-Adjusted Performance

Very Weak

Over the last 90 days MaxLinear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Diodes Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diodes Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with MaxLinear and Diodes Incorporated

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

The idea behind MaxLinear and Diodes Incorporated 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.