Correlation Between Baker Steel and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Baker Steel 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 Baker Steel and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baker Steel Resources and Microchip Technology, you can compare the effects of market volatilities on Baker Steel 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 Baker Steel with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Steel and Microchip Technology.
Diversification Opportunities for Baker Steel and Microchip Technology
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Baker and Microchip is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Baker Steel 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 Baker Steel Resources 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 Baker Steel i.e., Baker Steel and Microchip Technology go up and down completely randomly.
Pair Corralation between Baker Steel and Microchip Technology
Assuming the 90 days trading horizon Baker Steel Resources is expected to under-perform the Microchip Technology. But the stock apears to be less risky and, when comparing its historical volatility, Baker Steel Resources is 1.98 times less risky than Microchip Technology. The stock trades about -0.29 of its potential returns per unit of risk. The Microchip Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,655 in Microchip Technology on November 28, 2024 and sell it today you would earn a total of 310.00 from holding Microchip Technology or generate 5.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baker Steel Resources vs. Microchip Technology
Performance |
| Timeline |
| Baker Steel Resources |
| Microchip Technology |
Baker Steel and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Steel and Microchip Technology
The main advantage of trading using opposite Baker Steel and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Steel 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.| Baker Steel vs. United States Steel | Baker Steel vs. Ondine Biomedical | Baker Steel vs. Naturhouse Health SA | Baker Steel vs. Creo Medical Group |
| Microchip Technology vs. Gamma Communications PLC | Microchip Technology vs. Zoom Video Communications | Microchip Technology vs. Applied Materials | Microchip Technology vs. Geely Automobile Holdings |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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