Correlation Between Bank of America and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Microchip Technology, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Microchip Technology.
Diversification Opportunities for Bank of America and Microchip Technology
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Microchip is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and Microchip Technology go up and down completely randomly.
Pair Corralation between Bank of America and Microchip Technology
Considering the 90-day investment horizon Bank of America is expected to generate 0.7 times more return on investment than Microchip Technology. However, Bank of America is 1.43 times less risky than Microchip Technology. It trades about 0.17 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.11 per unit of risk. If you would invest 4,049 in Bank of America on August 30, 2024 and sell it today you would earn a total of 728.00 from holding Bank of America or generate 17.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Microchip Technology
Performance |
| Timeline |
| Bank of America |
| Microchip Technology |
Bank of America and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Microchip Technology
The main advantage of trading using opposite Bank of America and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Microchip Technology vs. Texas Instruments Incorporated | Microchip Technology vs. ON Semiconductor | Microchip Technology vs. Analog Devices | Microchip Technology vs. Qorvo Inc |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |