Correlation Between MaxLinear and Lattice Semiconductor

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

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

Diversification Opportunities for MaxLinear and Lattice Semiconductor

0.8

Correlation Coefficient

MaxLinear  Lattice Semiconductor

Very poor diversification

The 3 months correlation between MaxLinear and Lattice is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding MaxLinear and Lattice Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lattice Semiconductor and MaxLinear 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 MaxLinear are associated (or correlated) with Lattice Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lattice Semiconductor has no effect on the direction of MaxLinear i.e., MaxLinear and Lattice Semiconductor go up and down completely randomly.

Pair Corralation between MaxLinear and Lattice Semiconductor

Considering the 90-day investment horizon MaxLinear is expected to under-perform the Lattice Semiconductor. In addition to that, MaxLinear is 1.64 times more volatile than Lattice Semiconductor. It trades about -0.08 of its total potential returns per unit of risk. Lattice Semiconductor is currently generating about -0.03 per unit of volatility. If you would invest  6,167  in Lattice Semiconductor on July 7, 2024 and sell it today you would lose (866.00) from holding Lattice Semiconductor or give up 14.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

MaxLinear  vs.  Lattice Semiconductor

MaxLinear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MaxLinear 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 November 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Lattice Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lattice Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with MaxLinear and Lattice Semiconductor

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

The idea behind MaxLinear and Lattice Semiconductor 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.