Correlation Between LIFEWAY FOODS and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both LIFEWAY FOODS 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 LIFEWAY FOODS and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LIFEWAY FOODS and Microchip Technology Incorporated, you can compare the effects of market volatilities on LIFEWAY FOODS 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 LIFEWAY FOODS with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFEWAY FOODS and Microchip Technology.
Diversification Opportunities for LIFEWAY FOODS and Microchip Technology
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between LIFEWAY and Microchip is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding LIFEWAY FOODS and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and LIFEWAY FOODS 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 LIFEWAY FOODS 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 LIFEWAY FOODS i.e., LIFEWAY FOODS and Microchip Technology go up and down completely randomly.
Pair Corralation between LIFEWAY FOODS and Microchip Technology
Assuming the 90 days trading horizon LIFEWAY FOODS is expected to generate 2.58 times more return on investment than Microchip Technology. However, LIFEWAY FOODS is 2.58 times more volatile than Microchip Technology Incorporated. It trades about 0.08 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about 0.01 per unit of risk. If you would invest 486.00 in LIFEWAY FOODS on August 31, 2024 and sell it today you would earn a total of 1,794 from holding LIFEWAY FOODS or generate 369.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
LIFEWAY FOODS vs. Microchip Technology Incorpora
Performance |
| Timeline |
| LIFEWAY FOODS |
| Microchip Technology |
LIFEWAY FOODS and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LIFEWAY FOODS and Microchip Technology
The main advantage of trading using opposite LIFEWAY FOODS and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIFEWAY FOODS 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.| LIFEWAY FOODS vs. SIVERS SEMICONDUCTORS AB | LIFEWAY FOODS vs. Darden Restaurants | LIFEWAY FOODS vs. Reliance Steel Aluminum | LIFEWAY FOODS vs. Q2M Managementberatung AG |
| Microchip Technology vs. Siamgas And Petrochemicals | Microchip Technology vs. ULTRA CLEAN HLDGS | Microchip Technology vs. Datang International Power | Microchip Technology vs. Ultra Clean Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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