Correlation Between Texas Instruments and MACOM Technology

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

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

Diversification Opportunities for Texas Instruments and MACOM Technology

0.27

Correlation Coefficient

Texas Instruments  MACOM Technology

Modest diversification

The 3 months correlation between Texas and MACOM is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Texas Instruments Incorporated 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 Texas Instruments 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 Texas Instruments Incorporated 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 Texas Instruments i.e., Texas Instruments and MACOM Technology go up and down completely randomly.

Pair Corralation between Texas Instruments and MACOM Technology

Assuming the 90 days horizon Texas Instruments is expected to generate 3.79 times less return on investment than MACOM Technology. But when comparing it to its historical volatility, Texas Instruments Incorporated is 1.39 times less risky than MACOM Technology. It trades about 0.03 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,900  in MACOM Technology Solutions on September 22, 2024 and sell it today you would earn a total of  6,900  from holding MACOM Technology Solutions or generate 116.95% return on investment over 90 days.

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

Texas Instruments Incorporated  vs.  MACOM Technology Solutions

Texas Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

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

MACOM Technology Sol

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MACOM Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Texas Instruments and MACOM Technology

The main advantage of trading using opposite Texas Instruments and MACOM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Instruments 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 Texas Instruments Incorporated 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.