Correlation Between Renesas Electronics and MaxLinear

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

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

Diversification Opportunities for Renesas Electronics and MaxLinear

-0.36

Correlation Coefficient

Renesas Electronics  MaxLinear

Very good diversification

The 3 months correlation between Renesas and MaxLinear is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear and Renesas Electronics 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 Renesas Electronics 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 Renesas Electronics i.e., Renesas Electronics and MaxLinear go up and down completely randomly.

Pair Corralation between Renesas Electronics and MaxLinear

Assuming the 90 days horizon Renesas Electronics is expected to generate 0.63 times more return on investment than MaxLinear. However, Renesas Electronics is 1.59 times less risky than MaxLinear. It trades about 0.12 of its potential returns per unit of risk. MaxLinear is currently generating about 0.05 per unit of risk. If you would invest  1,284  in Renesas Electronics on October 10, 2024 and sell it today you would earn a total of  67.00  from holding Renesas Electronics or generate 5.22% return on investment over 90 days.

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

Renesas Electronics  vs.  MaxLinear

Renesas Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renesas Electronics 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 fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

MaxLinear

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MaxLinear are ranked lower than 13 (%) 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 Renesas Electronics and MaxLinear

The main advantage of trading using opposite Renesas Electronics and MaxLinear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renesas Electronics 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 Renesas Electronics 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..