Correlation Between Microchip Technology and American Eagle
Can any of the company-specific risk be diversified away by investing in both Microchip Technology and American Eagle 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 American Eagle 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 American Eagle Outfitters, you can compare the effects of market volatilities on Microchip Technology and American Eagle 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 American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and American Eagle.
Diversification Opportunities for Microchip Technology and American Eagle
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microchip and American is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters 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 American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of Microchip Technology i.e., Microchip Technology and American Eagle go up and down completely randomly.
Pair Corralation between Microchip Technology and American Eagle
Assuming the 90 days horizon Microchip Technology Incorporated is expected to generate 1.06 times more return on investment than American Eagle. However, Microchip Technology is 1.06 times more volatile than American Eagle Outfitters. It trades about 0.13 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.4 per unit of risk. If you would invest 5,015 in Microchip Technology Incorporated on December 10, 2024 and sell it today you would earn a total of 363.00 from holding Microchip Technology Incorporated or generate 7.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microchip Technology Incorpora vs. American Eagle Outfitters
Performance |
| Timeline |
| Microchip Technology |
| American Eagle Outfitters |
Microchip Technology and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microchip Technology and American Eagle
The main advantage of trading using opposite Microchip Technology and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microchip Technology position performs unexpectedly, American Eagle 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 American Eagle will offset losses from the drop in American Eagle's long position.| Microchip Technology vs. CarsalesCom | Microchip Technology vs. CANON MARKETING JP | Microchip Technology vs. FAST RETAIL ADR | Microchip Technology vs. BW OFFSHORE LTD |
| American Eagle vs. Zijin Mining Group | American Eagle vs. MCEWEN MINING INC | American Eagle vs. De Grey Mining | American Eagle vs. Monument Mining 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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