Correlation Between Globalfoundries and MaxLinear

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

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

Diversification Opportunities for Globalfoundries and MaxLinear

0.62

Correlation Coefficient

Globalfoundries  MaxLinear

Poor diversification

The 3 months correlation between Globalfoundries and MaxLinear is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear and Globalfoundries 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 Globalfoundries 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 Globalfoundries i.e., Globalfoundries and MaxLinear go up and down completely randomly.

Pair Corralation between Globalfoundries and MaxLinear

Considering the 90-day investment horizon Globalfoundries is expected to generate 2.83 times less return on investment than MaxLinear. But when comparing it to its historical volatility, Globalfoundries is 1.33 times less risky than MaxLinear. It trades about 0.07 of its potential returns per unit of risk. MaxLinear is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,455  in MaxLinear on September 16, 2024 and sell it today you would earn a total of  613.00  from holding MaxLinear or generate 42.13% return on investment over 90 days.

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

Globalfoundries  vs.  MaxLinear

Globalfoundries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled 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 weak basic indicators, MaxLinear disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Globalfoundries and MaxLinear

The main advantage of trading using opposite Globalfoundries and MaxLinear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globalfoundries 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 Globalfoundries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.