Correlation Between Air Products and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Air Products and Microchip 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 Air Products and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products Chemicals and Microchip Technology, you can compare the effects of market volatilities on Air Products and Microchip 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 Air Products with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Microchip Technology.
Diversification Opportunities for Air Products and Microchip Technology
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Air and Microchip is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Air Products 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 Air Products Chemicals are associated (or correlated) with Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Air Products i.e., Air Products and Microchip Technology go up and down completely randomly.
Pair Corralation between Air Products and Microchip Technology
Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 0.43 times more return on investment than Microchip Technology. However, Air Products Chemicals is 2.31 times less risky than Microchip Technology. It trades about 0.21 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.23 per unit of risk. If you would invest 31,569 in Air Products Chemicals on August 30, 2024 and sell it today you would earn a total of 1,770 from holding Air Products Chemicals or generate 5.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Air Products Chemicals vs. Microchip Technology
Performance |
| Timeline |
| Air Products Chemicals |
| Microchip Technology |
Air Products and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Microchip Technology
The main advantage of trading using opposite Air Products and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Microchip 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 Microchip Technology will offset losses from the drop in Microchip Technology's long position.| Air Products vs. Tungsten West PLC | Air Products vs. Argo Group Limited | Air Products vs. Hardide PLC | Air Products vs. Versarien PLC |
| Microchip Technology vs. Tungsten West PLC | Microchip Technology vs. Argo Group Limited | Microchip Technology vs. Hardide PLC | Microchip Technology vs. Versarien PLC |
Check out your portfolio center.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 Valuation module to check real value of public entities based on technical and fundamental data.
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