Correlation Between Asahi Group and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Asahi Group 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 Asahi Group and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asahi Group Holdings and Microchip Technology Incorporated, you can compare the effects of market volatilities on Asahi Group 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 Asahi Group with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asahi Group and Microchip Technology.
Diversification Opportunities for Asahi Group and Microchip Technology
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Asahi and Microchip is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Asahi Group Holdings and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Asahi Group 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 Asahi Group Holdings 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 Asahi Group i.e., Asahi Group and Microchip Technology go up and down completely randomly.
Pair Corralation between Asahi Group and Microchip Technology
Assuming the 90 days horizon Asahi Group Holdings is expected to generate 1.29 times more return on investment than Microchip Technology. However, Asahi Group is 1.29 times more volatile than Microchip Technology Incorporated. It trades about -0.05 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.1 per unit of risk. If you would invest 1,078 in Asahi Group Holdings on September 1, 2024 and sell it today you would lose (43.00) from holding Asahi Group Holdings or give up 3.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Asahi Group Holdings vs. Microchip Technology Incorpora
Performance |
| Timeline |
| Asahi Group Holdings |
| Microchip Technology |
Asahi Group and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asahi Group and Microchip Technology
The main advantage of trading using opposite Asahi Group and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asahi Group 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.| Asahi Group vs. AOI Electronics Co | Asahi Group vs. BYD ELECTRONIC | Asahi Group vs. UMC Electronics Co | Asahi Group vs. Geely Automobile Holdings |
| Microchip Technology vs. Regions Financial | Microchip Technology vs. Magnachip Semiconductor | Microchip Technology vs. Tower Semiconductor | Microchip Technology vs. ON SEMICONDUCTOR |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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