Correlation Between NVE and MaxLinear

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

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

Diversification Opportunities for NVE and MaxLinear

0.2

Correlation Coefficient

NVE  MaxLinear

Modest diversification

The 3 months correlation between NVE and MaxLinear is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding NVE Corp. and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear and NVE 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 NVE Corporation are associated (or correlated) with MaxLinear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MaxLinear has no effect on the direction of NVE i.e., NVE and MaxLinear go up and down completely randomly.

Pair Corralation between NVE and MaxLinear

Given the investment horizon of 90 days NVE is expected to generate 28.31 times less return on investment than MaxLinear. But when comparing it to its historical volatility, NVE Corporation is 2.0 times less risky than MaxLinear. It trades about 0.01 of its potential returns per unit of risk. MaxLinear is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,424  in MaxLinear on September 19, 2024 and sell it today you would earn a total of  639.00  from holding MaxLinear or generate 44.87% return on investment over 90 days.

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

NVE Corp.  vs.  MaxLinear

NVE Corporation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NVE Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, NVE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

MaxLinear

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MaxLinear are ranked lower than 10 (%) 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.

Pair Trading with NVE and MaxLinear

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

The idea behind NVE Corporation and MaxLinear 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.