Correlation Between Kaiser Aluminum and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum 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 Kaiser Aluminum and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaiser Aluminum and Microchip Technology Incorporated, you can compare the effects of market volatilities on Kaiser Aluminum 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 Kaiser Aluminum with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and Microchip Technology.
Diversification Opportunities for Kaiser Aluminum and Microchip Technology
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Kaiser and Microchip is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and Microchip Technology go up and down completely randomly.
Pair Corralation between Kaiser Aluminum and Microchip Technology
Assuming the 90 days trading horizon Kaiser Aluminum is expected to under-perform the Microchip Technology. But the stock apears to be less risky and, when comparing its historical volatility, Kaiser Aluminum is 1.24 times less risky than Microchip Technology. The stock trades about -0.14 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kaiser Aluminum vs. Microchip Technology Incorpora
Performance |
| Timeline |
| Kaiser Aluminum |
| Microchip Technology |
Kaiser Aluminum and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kaiser Aluminum and Microchip Technology
The main advantage of trading using opposite Kaiser Aluminum and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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.| Kaiser Aluminum vs. PACIFIC ONLINE | Kaiser Aluminum vs. Stag Industrial | Kaiser Aluminum vs. GungHo Online Entertainment | Kaiser Aluminum vs. ADRIATIC METALS LS 013355 |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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