Correlation Between MACOM Technology and LIFENET INSURANCE
Can any of the company-specific risk be diversified away by investing in both MACOM Technology and LIFENET INSURANCE 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 MACOM Technology and LIFENET INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MACOM Technology Solutions and LIFENET INSURANCE CO, you can compare the effects of market volatilities on MACOM Technology and LIFENET INSURANCE 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 MACOM Technology with a short position of LIFENET INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and LIFENET INSURANCE.
Diversification Opportunities for MACOM Technology and LIFENET INSURANCE
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MACOM and LIFENET is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and LIFENET INSURANCE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFENET INSURANCE and MACOM Technology 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 MACOM Technology Solutions are associated (or correlated) with LIFENET INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFENET INSURANCE has no effect on the direction of MACOM Technology i.e., MACOM Technology and LIFENET INSURANCE go up and down completely randomly.
Pair Corralation between MACOM Technology and LIFENET INSURANCE
Assuming the 90 days horizon MACOM Technology Solutions is expected to generate 1.22 times more return on investment than LIFENET INSURANCE. However, MACOM Technology is 1.22 times more volatile than LIFENET INSURANCE CO. It trades about 0.18 of its potential returns per unit of risk. LIFENET INSURANCE CO is currently generating about 0.1 per unit of risk. If you would invest 9,500 in MACOM Technology Solutions on September 25, 2024 and sell it today you would earn a total of 3,400 from holding MACOM Technology Solutions or generate 35.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
MACOM Technology Solutions vs. LIFENET INSURANCE CO
Performance |
Timeline |
MACOM Technology Sol |
LIFENET INSURANCE |
MACOM Technology and LIFENET INSURANCE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MACOM Technology and LIFENET INSURANCE
The main advantage of trading using opposite MACOM Technology and LIFENET INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology position performs unexpectedly, LIFENET INSURANCE 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 LIFENET INSURANCE will offset losses from the drop in LIFENET INSURANCE's long position.MACOM Technology vs. Sterling Construction | MACOM Technology vs. TYSON FOODS A | MACOM Technology vs. Chongqing Machinery Electric | MACOM Technology vs. North American Construction |
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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.
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