Correlation Between GoldMining and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both GoldMining 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 GoldMining and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GoldMining and Microchip Technology, you can compare the effects of market volatilities on GoldMining 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 GoldMining with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and Microchip Technology.
Diversification Opportunities for GoldMining and Microchip Technology
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GoldMining and Microchip is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and GoldMining 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 GoldMining 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 GoldMining i.e., GoldMining and Microchip Technology go up and down completely randomly.
Pair Corralation between GoldMining and Microchip Technology
Assuming the 90 days trading horizon GoldMining is expected to generate 1.38 times more return on investment than Microchip Technology. However, GoldMining is 1.38 times more volatile than Microchip Technology. It trades about -0.05 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.14 per unit of risk. If you would invest 126.00 in GoldMining on August 29, 2024 and sell it today you would lose (7.00) from holding GoldMining or give up 5.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 65.12% |
| Values | Daily Returns |
GoldMining vs. Microchip Technology
Performance |
| Timeline |
| GoldMining |
| Microchip Technology |
GoldMining and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GoldMining and Microchip Technology
The main advantage of trading using opposite GoldMining and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoldMining 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.| GoldMining vs. Lendinvest PLC | GoldMining vs. Neometals | GoldMining vs. Coor Service Management | GoldMining vs. Albion Technology General |
| Microchip Technology vs. Lendinvest PLC | Microchip Technology vs. Neometals | Microchip Technology vs. Coor Service Management | Microchip Technology vs. Albion Technology General |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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