Correlation Between Highlight Communications and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Highlight Communications 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 Highlight Communications and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and Microchip Technology Incorporated, you can compare the effects of market volatilities on Highlight Communications 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 Highlight Communications with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and Microchip Technology.
Diversification Opportunities for Highlight Communications and Microchip Technology
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Highlight and Microchip is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Highlight Communications 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 Highlight Communications AG 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 Highlight Communications i.e., Highlight Communications and Microchip Technology go up and down completely randomly.
Pair Corralation between Highlight Communications and Microchip Technology
Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 3.13 times more return on investment than Microchip Technology. However, Highlight Communications is 3.13 times more volatile than Microchip Technology Incorporated. It trades about 0.23 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.14 per unit of risk. If you would invest 115.00 in Highlight Communications AG on October 13, 2024 and sell it today you would earn a total of 32.00 from holding Highlight Communications AG or generate 27.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. Microchip Technology Incorpora
Performance |
| Timeline |
| Highlight Communications |
| Microchip Technology |
Highlight Communications and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and Microchip Technology
The main advantage of trading using opposite Highlight Communications and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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.| Highlight Communications vs. ANTA SPORTS PRODUCT | Highlight Communications vs. ARISTOCRAT LEISURE | Highlight Communications vs. Zoom Video Communications | Highlight Communications vs. Treasury Wine Estates |
| Microchip Technology vs. Highlight Communications AG | Microchip Technology vs. Shenandoah Telecommunications | Microchip Technology vs. COMPUTERSHARE | Microchip Technology vs. CRISPR Therapeutics AG |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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