Correlation Between MACOM Technology and Sotherly Hotels

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

Diversification Opportunities for MACOM Technology and Sotherly Hotels

0.86

Correlation Coefficient

MACOM Technology  Sotherly Hotels

Very poor diversification

The 3 months correlation between MACOM and Sotherly is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels 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 Sotherly Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotherly Hotels has no effect on the direction of MACOM Technology i.e., MACOM Technology and Sotherly Hotels go up and down completely randomly.

Pair Corralation between MACOM Technology and Sotherly Hotels

Assuming the 90 days horizon MACOM Technology is expected to generate 1.05 times less return on investment than Sotherly Hotels. But when comparing it to its historical volatility, MACOM Technology Solutions is 1.72 times less risky than Sotherly Hotels. It trades about 0.21 of its potential returns per unit of risk. Sotherly Hotels is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Sotherly Hotels on April 13, 2025 and sell it today you would earn a total of  17.00  from holding Sotherly Hotels or generate 31.48% return on investment over 90 days.

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

MACOM Technology Solutions  vs.  Sotherly Hotels

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 16 (%) 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.

Sotherly Hotels

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sotherly Hotels are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sotherly Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MACOM Technology and Sotherly Hotels

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

The idea behind MACOM Technology Solutions and Sotherly Hotels 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.