Correlation Between Federal Agricultural and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural 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 Federal Agricultural and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Agricultural Mortgage and Microchip Technology Incorporated, you can compare the effects of market volatilities on Federal Agricultural 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 Federal Agricultural with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and Microchip Technology.
Diversification Opportunities for Federal Agricultural and Microchip Technology
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federal and Microchip is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Federal Agricultural 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 Federal Agricultural Mortgage 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 Federal Agricultural i.e., Federal Agricultural and Microchip Technology go up and down completely randomly.
Pair Corralation between Federal Agricultural and Microchip Technology
Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 0.88 times more return on investment than Microchip Technology. However, Federal Agricultural Mortgage is 1.14 times less risky than Microchip Technology. It trades about 0.07 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.01 per unit of risk. If you would invest 11,175 in Federal Agricultural Mortgage on December 4, 2024 and sell it today you would earn a total of 8,825 from holding Federal Agricultural Mortgage or generate 78.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. Microchip Technology Incorpora
Performance |
| Timeline |
| Federal Agricultural |
| Microchip Technology |
Federal Agricultural and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and Microchip Technology
The main advantage of trading using opposite Federal Agricultural and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural 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.| Federal Agricultural vs. United Microelectronics | Federal Agricultural vs. Samsung Electronics Co | Federal Agricultural vs. Methode Electronics | Federal Agricultural vs. Electronic Arts |
| Microchip Technology vs. Samsung Electronics Co | Microchip Technology vs. Electronic Arts | Microchip Technology vs. STMicroelectronics NV | Microchip Technology vs. Nanjing Panda Electronics |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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