Correlation Between Kulicke and MACOM Technology

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

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

Diversification Opportunities for Kulicke and MACOM Technology

0.91

Correlation Coefficient

Kulicke  MACOM Technology

Almost no diversification

The 3 months correlation between Kulicke and MACOM is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Kulicke and Soffa 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 Kulicke 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 Kulicke and Soffa 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 Kulicke i.e., Kulicke and MACOM Technology go up and down completely randomly.

Pair Corralation between Kulicke and MACOM Technology

Given the investment horizon of 90 days Kulicke is expected to generate 1.79 times less return on investment than MACOM Technology. But when comparing it to its historical volatility, Kulicke and Soffa is 1.23 times less risky than MACOM Technology. It trades about 0.12 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  9,797  in MACOM Technology Solutions on August 31, 2024 and sell it today you would earn a total of  3,370  from holding MACOM Technology Solutions or generate 34.4% return on investment over 90 days.

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

Kulicke and Soffa  vs.  MACOM Technology Solutions

Kulicke and Soffa

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kulicke and Soffa are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Kulicke exhibited solid returns over the last few months and may actually be approaching a breakup point.

MACOM Technology Sol

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, MACOM Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kulicke and MACOM Technology

The main advantage of trading using opposite Kulicke and MACOM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kulicke 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 Kulicke and Soffa 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.