Correlation Between THORNEY TECHS and MACOM Technology

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

By analyzing existing cross correlation between THORNEY TECHS LTD and MACOM Technology Solutions, you can compare the effects of market volatilities on THORNEY TECHS and MACOM Technology 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 THORNEY TECHS with a short position of MACOM Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of THORNEY TECHS and MACOM Technology.

Diversification Opportunities for THORNEY TECHS and MACOM Technology

-0.53

Correlation Coefficient

THORNEY TECHS  MACOM Technology

Excellent diversification

The 3 months correlation between THORNEY and MACOM is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding THORNEY TECHS LTD and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol and THORNEY TECHS 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 THORNEY TECHS LTD are associated (or correlated) with MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of THORNEY TECHS i.e., THORNEY TECHS and MACOM Technology go up and down completely randomly.

Pair Corralation between THORNEY TECHS and MACOM Technology

Assuming the 90 days horizon THORNEY TECHS LTD is expected to generate 2.29 times more return on investment than MACOM Technology. However, THORNEY TECHS is 2.29 times more volatile than MACOM Technology Solutions. It trades about 0.01 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about -0.15 per unit of risk. If you would invest  7.60  in THORNEY TECHS LTD on October 16, 2024 and sell it today you would lose (0.05) from holding THORNEY TECHS LTD or give up 0.66% of portfolio value over 90 days.

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

THORNEY TECHS LTD  vs.  MACOM Technology Solutions

THORNEY TECHS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days THORNEY TECHS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, THORNEY TECHS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MACOM Technology Sol

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with THORNEY TECHS and MACOM Technology

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

The idea behind THORNEY TECHS LTD and MACOM Technology Solutions 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.