Correlation Between Gold Fields and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Gold Fields 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 Gold Fields and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Fields Ltd and Microchip Technology, you can compare the effects of market volatilities on Gold Fields 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 Gold Fields with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and Microchip Technology.
Diversification Opportunities for Gold Fields and Microchip Technology
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Gold and Microchip is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Gold Fields 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 Gold Fields Ltd 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 Gold Fields i.e., Gold Fields and Microchip Technology go up and down completely randomly.
Pair Corralation between Gold Fields and Microchip Technology
Considering the 90-day investment horizon Gold Fields Ltd is expected to under-perform the Microchip Technology. In addition to that, Gold Fields is 1.27 times more volatile than Microchip Technology. It trades about -0.23 of its total potential returns per unit of risk. Microchip Technology is currently generating about -0.23 per unit of volatility. If you would invest 7,527 in Microchip Technology on August 24, 2024 and sell it today you would lose (876.00) from holding Microchip Technology or give up 11.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Fields Ltd vs. Microchip Technology
Performance |
| Timeline |
| Gold Fields |
| Microchip Technology |
Gold Fields and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Fields and Microchip Technology
The main advantage of trading using opposite Gold Fields and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields 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.| Gold Fields vs. Agnico Eagle Mines | Gold Fields vs. Kinross Gold | Gold Fields vs. Harmony Gold Mining | Gold Fields vs. Franco Nevada |
| Microchip Technology vs. Eshallgo Class A | Microchip Technology vs. Amtech Systems | Microchip Technology vs. Gold Fields Ltd | Microchip Technology vs. Aegean Airlines SA |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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