Correlation Between BW Offshore and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both BW Offshore 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 BW Offshore and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Offshore and Microchip Technology, you can compare the effects of market volatilities on BW Offshore 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 BW Offshore with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Microchip Technology.
Diversification Opportunities for BW Offshore and Microchip Technology
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between 0RKH and Microchip is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and BW Offshore 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 BW Offshore 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 BW Offshore i.e., BW Offshore and Microchip Technology go up and down completely randomly.
Pair Corralation between BW Offshore and Microchip Technology
Assuming the 90 days trading horizon BW Offshore is expected to generate 0.95 times more return on investment than Microchip Technology. However, BW Offshore is 1.06 times less risky than Microchip Technology. It trades about 0.04 of its potential returns per unit of risk. Microchip Technology is currently generating about 0.0 per unit of risk. If you would invest 2,302 in BW Offshore on September 1, 2024 and sell it today you would earn a total of 486.00 from holding BW Offshore or generate 21.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.46% |
| Values | Daily Returns |
BW Offshore vs. Microchip Technology
Performance |
| Timeline |
| BW Offshore |
| Microchip Technology |
BW Offshore and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW Offshore and Microchip Technology
The main advantage of trading using opposite BW Offshore and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore 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.| BW Offshore vs. Microchip Technology | BW Offshore vs. Cizzle Biotechnology Holdings | BW Offshore vs. Advanced Medical Solutions | BW Offshore vs. Allianz Technology Trust |
| Microchip Technology vs. MoneysupermarketCom Group PLC | Microchip Technology vs. Pets at Home | Microchip Technology vs. GoldMining | Microchip Technology vs. McEwen Mining |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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