Correlation Between MACOM Technology and Applied Materials

Can any of the company-specific risk be diversified away by investing in both MACOM Technology and Applied Materials 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 Applied Materials 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 Applied Materials, you can compare the effects of market volatilities on MACOM Technology and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and Applied Materials.

Diversification Opportunities for MACOM Technology and Applied Materials

0.9

Correlation Coefficient

MACOM Technology  Applied Materials

Almost no diversification

The 3 months correlation between MACOM and Applied is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of MACOM Technology i.e., MACOM Technology and Applied Materials go up and down completely randomly.

Pair Corralation between MACOM Technology and Applied Materials

Assuming the 90 days horizon MACOM Technology Solutions is expected to generate 0.86 times more return on investment than Applied Materials. However, MACOM Technology Solutions is 1.16 times less risky than Applied Materials. It trades about 0.27 of its potential returns per unit of risk. Applied Materials is currently generating about 0.22 per unit of risk. If you would invest  8,400  in MACOM Technology Solutions on April 22, 2025 and sell it today you would earn a total of  3,800  from holding MACOM Technology Solutions or generate 45.24% return on investment over 90 days.

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

MACOM Technology Solutions  vs.  Applied Materials

MACOM Technology Sol

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MACOM Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Applied Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Applied Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MACOM Technology and Applied Materials

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

The idea behind MACOM Technology Solutions and Applied Materials 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.