Correlation Between MaxLinear and Silicon Laboratories

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

By analyzing existing cross correlation between MaxLinear and Silicon Laboratories, you can compare the effects of market volatilities on MaxLinear and Silicon Laboratories 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 Silicon Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of MaxLinear and Silicon Laboratories.

Diversification Opportunities for MaxLinear and Silicon Laboratories

0.11

Correlation Coefficient

MaxLinear  Silicon Laboratories

Average diversification

The 3 months correlation between MaxLinear and Silicon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding MaxLinear and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories 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 Silicon Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Laboratories has no effect on the direction of MaxLinear i.e., MaxLinear and Silicon Laboratories go up and down completely randomly.

Pair Corralation between MaxLinear and Silicon Laboratories

Considering the 90-day investment horizon MaxLinear is expected to generate 1.49 times more return on investment than Silicon Laboratories. However, MaxLinear is 1.49 times more volatile than Silicon Laboratories. It trades about 0.07 of its potential returns per unit of risk. Silicon Laboratories is currently generating about 0.06 per unit of risk. If you would invest  1,439  in MaxLinear on September 4, 2024 and sell it today you would earn a total of  178.00  from holding MaxLinear or generate 12.37% return on investment over 90 days.

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

MaxLinear  vs.  Silicon Laboratories

MaxLinear

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MaxLinear are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, MaxLinear disclosed solid returns over the last few months and may actually be approaching a breakup point.

Silicon Laboratories

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Laboratories are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Silicon Laboratories may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MaxLinear and Silicon Laboratories

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

The idea behind MaxLinear and Silicon Laboratories 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.