Correlation Between MACOM Technology and RELIANCE STEEL

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

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

Diversification Opportunities for MACOM Technology and RELIANCE STEEL

-0.44

Correlation Coefficient

MACOM Technology  RELIANCE STEEL

Very good diversification

The 3 months correlation between MACOM and RELIANCE is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and RELIANCE STEEL AL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STEEL AL and MACOM Technology 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 MACOM Technology Solutions are associated (or correlated) with RELIANCE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STEEL AL has no effect on the direction of MACOM Technology i.e., MACOM Technology and RELIANCE STEEL go up and down completely randomly.

Pair Corralation between MACOM Technology and RELIANCE STEEL

Assuming the 90 days horizon MACOM Technology Solutions is expected to generate 1.61 times more return on investment than RELIANCE STEEL. However, MACOM Technology is 1.61 times more volatile than RELIANCE STEEL AL. It trades about 0.07 of its potential returns per unit of risk. RELIANCE STEEL AL is currently generating about -0.1 per unit of risk. If you would invest  8,600  in MACOM Technology Solutions on March 4, 2024 and sell it today you would earn a total of  700.00  from holding MACOM Technology Solutions or generate 8.14% return on investment over 90 days.

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

MACOM Technology Solutions  vs.  RELIANCE STEEL AL

MACOM Technology Sol

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MACOM Technology may actually be approaching a critical reversion point that can send shares even higher in July 2024.

RELIANCE STEEL AL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RELIANCE STEEL AL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with MACOM Technology and RELIANCE STEEL

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

The idea behind MACOM Technology Solutions and RELIANCE STEEL AL 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.