Correlation Between AM EAGLE and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both AM EAGLE 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 AM EAGLE and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AM EAGLE OUTFITTERS and Microchip Technology Incorporated, you can compare the effects of market volatilities on AM EAGLE 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 AM EAGLE with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of AM EAGLE and Microchip Technology.
Diversification Opportunities for AM EAGLE and Microchip Technology
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AFG and Microchip is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and AM EAGLE 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 AM EAGLE OUTFITTERS 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 AM EAGLE i.e., AM EAGLE and Microchip Technology go up and down completely randomly.
Pair Corralation between AM EAGLE and Microchip Technology
Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to under-perform the Microchip Technology. But the stock apears to be less risky and, when comparing its historical volatility, AM EAGLE OUTFITTERS is 1.12 times less risky than Microchip Technology. The stock trades about -0.31 of its potential returns per unit of risk. The Microchip Technology Incorporated is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest 6,728 in Microchip Technology Incorporated on October 1, 2024 and sell it today you would lose (1,137) from holding Microchip Technology Incorporated or give up 16.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AM EAGLE OUTFITTERS vs. Microchip Technology Incorpora
Performance |
| Timeline |
| AM EAGLE OUTFITTERS |
| Microchip Technology |
AM EAGLE and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AM EAGLE and Microchip Technology
The main advantage of trading using opposite AM EAGLE and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AM EAGLE 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.The idea behind AM EAGLE OUTFITTERS and Microchip Technology Incorporated pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Microchip Technology vs. BlueScope Steel Limited | Microchip Technology vs. National Beverage Corp | Microchip Technology vs. AUSTEVOLL SEAFOOD | Microchip Technology vs. Nippon Steel |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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