Correlation Between Lumia and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Lumia 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 Lumia and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and Microchip Technology Incorporated, you can compare the effects of market volatilities on Lumia 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 Lumia with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and Microchip Technology.
Diversification Opportunities for Lumia and Microchip Technology
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lumia and Microchip is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Lumia 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 Lumia 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 Lumia i.e., Lumia and Microchip Technology go up and down completely randomly.
Pair Corralation between Lumia and Microchip Technology
Assuming the 90 days trading horizon Lumia is expected to under-perform the Microchip Technology. In addition to that, Lumia is 2.92 times more volatile than Microchip Technology Incorporated. It trades about -0.37 of its total potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.17 per unit of volatility. If you would invest 18,403 in Microchip Technology Incorporated on October 12, 2024 and sell it today you would lose (1,303) from holding Microchip Technology Incorporated or give up 7.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 85.71% |
| Values | Daily Returns |
Lumia vs. Microchip Technology Incorpora
Performance |
| Timeline |
| Lumia |
| Microchip Technology |
Lumia and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and Microchip Technology
The main advantage of trading using opposite Lumia and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia 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.The idea behind Lumia and Microchip Technology Incorporated pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Microchip Technology vs. T Mobile | Microchip Technology vs. Charter Communications | Microchip Technology vs. Nordon Indstrias Metalrgicas | Microchip Technology vs. MAHLE Metal Leve |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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