Correlation Between CATLIN GROUP and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both CATLIN GROUP 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 CATLIN GROUP and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CATLIN GROUP and Microchip Technology, you can compare the effects of market volatilities on CATLIN GROUP 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 CATLIN GROUP with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CATLIN GROUP and Microchip Technology.
Diversification Opportunities for CATLIN GROUP and Microchip Technology
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CATLIN and Microchip is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding CATLIN GROUP and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and CATLIN GROUP 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 CATLIN GROUP 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 CATLIN GROUP i.e., CATLIN GROUP and Microchip Technology go up and down completely randomly.
Pair Corralation between CATLIN GROUP and Microchip Technology
Assuming the 90 days trading horizon CATLIN GROUP is expected to generate 0.7 times more return on investment than Microchip Technology. However, CATLIN GROUP is 1.42 times less risky than Microchip Technology. It trades about 0.04 of its potential returns per unit of risk. Microchip Technology is currently generating about 0.0 per unit of risk. If you would invest 7,200 in CATLIN GROUP on September 4, 2024 and sell it today you would earn a total of 2,200 from holding CATLIN GROUP or generate 30.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
CATLIN GROUP vs. Microchip Technology
Performance |
| Timeline |
| CATLIN GROUP |
| Microchip Technology |
CATLIN GROUP and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CATLIN GROUP and Microchip Technology
The main advantage of trading using opposite CATLIN GROUP and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CATLIN GROUP 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.| CATLIN GROUP vs. Tungsten West PLC | CATLIN GROUP vs. Versarien PLC | CATLIN GROUP vs. Quantum Blockchain Technologies | CATLIN GROUP vs. Malvern International |
| Microchip Technology vs. Samsung Electronics Co | Microchip Technology vs. Samsung Electronics Co | Microchip Technology vs. Hyundai Motor | Microchip Technology vs. Toyota Motor Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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