Correlation Between Microchip Technology and Lion Biotechnologies
Can any of the company-specific risk be diversified away by investing in both Microchip Technology and Lion Biotechnologies 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 Microchip Technology and Lion Biotechnologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microchip Technology Incorporated and Lion Biotechnologies, you can compare the effects of market volatilities on Microchip Technology and Lion Biotechnologies 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 Microchip Technology with a short position of Lion Biotechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and Lion Biotechnologies.
Diversification Opportunities for Microchip Technology and Lion Biotechnologies
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microchip and Lion is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and Lion Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Biotechnologies and Microchip Technology 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 Microchip Technology Incorporated are associated (or correlated) with Lion Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Biotechnologies has no effect on the direction of Microchip Technology i.e., Microchip Technology and Lion Biotechnologies go up and down completely randomly.
Pair Corralation between Microchip Technology and Lion Biotechnologies
Assuming the 90 days horizon Microchip Technology Incorporated is expected to under-perform the Lion Biotechnologies. But the stock apears to be less risky and, when comparing its historical volatility, Microchip Technology Incorporated is 2.52 times less risky than Lion Biotechnologies. The stock trades about -0.1 of its potential returns per unit of risk. The Lion Biotechnologies is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 966.00 in Lion Biotechnologies on September 1, 2024 and sell it today you would lose (66.00) from holding Lion Biotechnologies or give up 6.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microchip Technology Incorpora vs. Lion Biotechnologies
Performance |
| Timeline |
| Microchip Technology |
| Lion Biotechnologies |
Microchip Technology and Lion Biotechnologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microchip Technology and Lion Biotechnologies
The main advantage of trading using opposite Microchip Technology and Lion Biotechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microchip Technology position performs unexpectedly, Lion Biotechnologies 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 Lion Biotechnologies will offset losses from the drop in Lion Biotechnologies' long position.| Microchip Technology vs. Regions Financial | Microchip Technology vs. Magnachip Semiconductor | Microchip Technology vs. Tower Semiconductor | Microchip Technology vs. ON SEMICONDUCTOR |
| Lion Biotechnologies vs. NIPPON STEEL SPADR | Lion Biotechnologies vs. Cleanaway Waste Management | Lion Biotechnologies vs. Pembina Pipeline Corp | Lion Biotechnologies vs. CosmoSteel Holdings Limited |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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