Correlation Between Silicon Laboratories and MACOM Technology

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

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

Diversification Opportunities for Silicon Laboratories and MACOM Technology

0.57

Correlation Coefficient

Silicon Laboratories  MACOM Technology

Very weak diversification

The 3 months correlation between Silicon and MACOM is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Laboratories 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 Silicon 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 Silicon Laboratories 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 Silicon Laboratories i.e., Silicon Laboratories and MACOM Technology go up and down completely randomly.

Pair Corralation between Silicon Laboratories and MACOM Technology

Given the investment horizon of 90 days Silicon Laboratories is expected to generate 1.12 times more return on investment than MACOM Technology. However, Silicon Laboratories is 1.12 times more volatile than MACOM Technology Solutions. It trades about 0.02 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about -0.02 per unit of risk. If you would invest  11,515  in Silicon Laboratories on July 7, 2024 and sell it today you would earn a total of  143.00  from holding Silicon Laboratories or generate 1.24% return on investment over 90 days.

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

Silicon Laboratories  vs.  MACOM Technology Solutions

Silicon Laboratories

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Laboratories are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Silicon Laboratories is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

MACOM Technology Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MACOM Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, MACOM Technology is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Silicon Laboratories and MACOM Technology

The main advantage of trading using opposite Silicon Laboratories and MACOM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Laboratories 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 Silicon Laboratories 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.