Correlation Between Dolby Laboratories and Maximus

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

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

Diversification Opportunities for Dolby Laboratories and Maximus

0.45

Correlation Coefficient

Dolby Laboratories  Maximus

Very weak diversification

The 3 months correlation between Dolby and Maximus is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dolby Laboratories and Maximus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maximus and Dolby Laboratories 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 Dolby Laboratories are associated (or correlated) with Maximus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maximus has no effect on the direction of Dolby Laboratories i.e., Dolby Laboratories and Maximus go up and down completely randomly.

Pair Corralation between Dolby Laboratories and Maximus

Considering the 90-day investment horizon Dolby Laboratories is expected to under-perform the Maximus. In addition to that, Dolby Laboratories is 1.07 times more volatile than Maximus. It trades about -0.27 of its total potential returns per unit of risk. Maximus is currently generating about -0.13 per unit of volatility. If you would invest  8,237  in Maximus on January 30, 2024 and sell it today you would lose (194.00) from holding Maximus or give up 2.36% of portfolio value over 90 days.

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

Dolby Laboratories  vs.  Maximus

Dolby Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dolby Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Dolby Laboratories is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Maximus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maximus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Maximus is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dolby Laboratories and Maximus

The main advantage of trading using opposite Dolby Laboratories and Maximus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dolby Laboratories position performs unexpectedly, Maximus 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 Maximus will offset losses from the drop in Maximus' long position.

The idea behind Dolby Laboratories and Maximus 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.