Correlation Between Diodes Incorporated and MaxLinear

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

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

Diversification Opportunities for Diodes Incorporated and MaxLinear

0.35

Correlation Coefficient

Diodes Incorporated  MaxLinear

Weak diversification

The 3 months correlation between Diodes and MaxLinear is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Diodes Incorporated and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear and Diodes Incorporated 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 Diodes Incorporated are associated (or correlated) with MaxLinear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MaxLinear has no effect on the direction of Diodes Incorporated i.e., Diodes Incorporated and MaxLinear go up and down completely randomly.

Pair Corralation between Diodes Incorporated and MaxLinear

Given the investment horizon of 90 days Diodes Incorporated is expected to under-perform the MaxLinear. But the stock apears to be less risky and, when comparing its historical volatility, Diodes Incorporated is 1.61 times less risky than MaxLinear. The stock trades about -0.02 of its potential returns per unit of risk. The MaxLinear is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,504  in MaxLinear on February 10, 2024 and sell it today you would lose (568.00) from holding MaxLinear or give up 22.68% of portfolio value over 90 days.

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

Diodes Incorporated  vs.  MaxLinear

Diodes Incorporated

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Diodes Incorporated may actually be approaching a critical reversion point that can send shares even higher in June 2024.

MaxLinear

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days MaxLinear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, MaxLinear is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Diodes Incorporated and MaxLinear

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

The idea behind Diodes Incorporated and MaxLinear 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.