Correlation Between APPLIED MATERIALS and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS 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 APPLIED MATERIALS and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Microchip Technology Incorporated, you can compare the effects of market volatilities on APPLIED MATERIALS 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 APPLIED MATERIALS with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Microchip Technology.
Diversification Opportunities for APPLIED MATERIALS and Microchip Technology
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between APPLIED and Microchip is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and Microchip Technology go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Microchip Technology
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.7 times more return on investment than Microchip Technology. However, APPLIED MATERIALS is 1.7 times more volatile than Microchip Technology Incorporated. It trades about 0.03 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.2 per unit of risk. If you would invest 17,196 in APPLIED MATERIALS on November 6, 2024 and sell it today you would earn a total of 176.00 from holding APPLIED MATERIALS or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
APPLIED MATERIALS vs. Microchip Technology Incorpora
Performance |
| Timeline |
| APPLIED MATERIALS |
| Microchip Technology |
APPLIED MATERIALS and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Microchip Technology
The main advantage of trading using opposite APPLIED MATERIALS and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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.| APPLIED MATERIALS vs. BW OFFSHORE LTD | APPLIED MATERIALS vs. SCANSOURCE | APPLIED MATERIALS vs. Medical Properties Trust | APPLIED MATERIALS vs. China Resources Beer |
| Microchip Technology vs. GWILLI FOOD | Microchip Technology vs. TreeHouse Foods | Microchip Technology vs. SPORT LISBOA E | Microchip Technology vs. BII Railway Transportation |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |