Correlation Between Black Hills and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Black Hills 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 Black Hills and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and Microchip Technology, you can compare the effects of market volatilities on Black Hills 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 Black Hills with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Microchip Technology.
Diversification Opportunities for Black Hills and Microchip Technology
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Black and Microchip is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Black Hills 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 Black Hills 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 Black Hills i.e., Black Hills and Microchip Technology go up and down completely randomly.
Pair Corralation between Black Hills and Microchip Technology
Considering the 90-day investment horizon Black Hills is expected to generate 0.58 times more return on investment than Microchip Technology. However, Black Hills is 1.72 times less risky than Microchip Technology. It trades about 0.24 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.25 per unit of risk. If you would invest 5,933 in Black Hills on August 30, 2024 and sell it today you would earn a total of 461.00 from holding Black Hills or generate 7.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Hills vs. Microchip Technology
Performance |
| Timeline |
| Black Hills |
| Microchip Technology |
Black Hills and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and Microchip Technology
The main advantage of trading using opposite Black Hills and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills 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.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| Microchip Technology vs. First Solar | Microchip Technology vs. Sunrun Inc | Microchip Technology vs. Canadian Solar | Microchip Technology vs. SolarEdge Technologies |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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