Correlation Between EMCORE and MaxLinear

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

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

Diversification Opportunities for EMCORE and MaxLinear

0.45

Correlation Coefficient

EMCORE  MaxLinear

Very weak diversification

The 3 months correlation between EMCORE and MaxLinear is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding EMCORE and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear and EMCORE 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 EMCORE 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 EMCORE i.e., EMCORE and MaxLinear go up and down completely randomly.

Pair Corralation between EMCORE and MaxLinear

Given the investment horizon of 90 days EMCORE is expected to generate 2.54 times more return on investment than MaxLinear. However, EMCORE is 2.54 times more volatile than MaxLinear. It trades about 0.18 of its potential returns per unit of risk. MaxLinear is currently generating about 0.14 per unit of risk. If you would invest  105.00  in EMCORE on September 16, 2024 and sell it today you would earn a total of  190.00  from holding EMCORE or generate 180.95% return on investment over 90 days.

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

EMCORE  vs.  MaxLinear

EMCORE

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMCORE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal forward-looking signals, EMCORE reported solid returns over the last few months and may actually be approaching a breakup point.

MaxLinear

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MaxLinear are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, MaxLinear disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMCORE and MaxLinear

The main advantage of trading using opposite EMCORE and MaxLinear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCORE 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 EMCORE 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.