Correlation Between Monolithic Power and Marvell Technology

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

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

Diversification Opportunities for Monolithic Power and Marvell Technology

0.59

Correlation Coefficient

Monolithic Power  Marvell Technology

Very weak diversification

The 3 months correlation between Monolithic and Marvell is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Monolithic Power Systems and Marvell Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marvell Technology and Monolithic Power 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 Monolithic Power Systems are associated (or correlated) with Marvell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marvell Technology has no effect on the direction of Monolithic Power i.e., Monolithic Power and Marvell Technology go up and down completely randomly.

Pair Corralation between Monolithic Power and Marvell Technology

Given the investment horizon of 90 days Monolithic Power Systems is expected to generate 0.83 times more return on investment than Marvell Technology. However, Monolithic Power Systems is 1.21 times less risky than Marvell Technology. It trades about -0.08 of its potential returns per unit of risk. Marvell Technology Group is currently generating about -0.24 per unit of risk. If you would invest  62,319  in Monolithic Power Systems on January 7, 2025 and sell it today you would lose (14,580) from holding Monolithic Power Systems or give up 23.4% of portfolio value over 90 days.

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

Monolithic Power Systems  vs.  Marvell Technology Group

Monolithic Power Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monolithic Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Marvell Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marvell Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Monolithic Power and Marvell Technology

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

The idea behind Monolithic Power Systems and Marvell Technology Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.