Correlation Between Microchip Technology and Fannie Mae
Can any of the company-specific risk be diversified away by investing in both Microchip Technology and Fannie Mae 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 Microchip Technology and Fannie Mae into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microchip Technology and Fannie Mae, you can compare the effects of market volatilities on Microchip Technology and Fannie Mae 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 Microchip Technology with a short position of Fannie Mae. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and Fannie Mae.
Diversification Opportunities for Microchip Technology and Fannie Mae
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microchip and Fannie is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and Fannie Mae in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fannie Mae and Microchip 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 Microchip Technology are associated (or correlated) with Fannie Mae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fannie Mae has no effect on the direction of Microchip Technology i.e., Microchip Technology and Fannie Mae go up and down completely randomly.
Pair Corralation between Microchip Technology and Fannie Mae
Assuming the 90 days trading horizon Microchip Technology is expected to under-perform the Fannie Mae. But the stock apears to be less risky and, when comparing its historical volatility, Microchip Technology is 4.52 times less risky than Fannie Mae. The stock trades about -0.14 of its potential returns per unit of risk. The Fannie Mae is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 145.00 in Fannie Mae on August 28, 2024 and sell it today you would earn a total of 205.00 from holding Fannie Mae or generate 141.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Microchip Technology vs. Fannie Mae
Performance |
| Timeline |
| Microchip Technology |
| Fannie Mae |
Microchip Technology and Fannie Mae Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microchip Technology and Fannie Mae
The main advantage of trading using opposite Microchip Technology and Fannie Mae positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microchip Technology position performs unexpectedly, Fannie Mae 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 Fannie Mae will offset losses from the drop in Fannie Mae's long position.| Microchip Technology vs. Air Products Chemicals | Microchip Technology vs. Zoom Video Communications | Microchip Technology vs. Aeorema Communications Plc | Microchip Technology vs. Alfa Financial Software |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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