Correlation Between SIMS METAL and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both SIMS METAL 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 SIMS METAL and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SIMS METAL MGT and Microchip Technology Incorporated, you can compare the effects of market volatilities on SIMS METAL 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 SIMS METAL with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and Microchip Technology.
Diversification Opportunities for SIMS METAL and Microchip Technology
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SIMS and Microchip is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and SIMS METAL 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 SIMS METAL MGT 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 SIMS METAL i.e., SIMS METAL and Microchip Technology go up and down completely randomly.
Pair Corralation between SIMS METAL and Microchip Technology
Assuming the 90 days trading horizon SIMS METAL MGT is expected to under-perform the Microchip Technology. But the stock apears to be less risky and, when comparing its historical volatility, SIMS METAL MGT is 2.01 times less risky than Microchip Technology. The stock trades about -0.05 of its potential returns per unit of risk. The Microchip Technology Incorporated is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,857 in Microchip Technology Incorporated on December 9, 2024 and sell it today you would earn a total of 636.00 from holding Microchip Technology Incorporated or generate 13.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SIMS METAL MGT vs. Microchip Technology Incorpora
Performance |
| Timeline |
| SIMS METAL MGT |
| Microchip Technology |
SIMS METAL and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and Microchip Technology
The main advantage of trading using opposite SIMS METAL and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL 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.| SIMS METAL vs. H2O Retailing | SIMS METAL vs. Auto Trader Group | SIMS METAL vs. Retail Estates NV | SIMS METAL vs. ELMOS SEMICONDUCTOR |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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