Correlation Between Microchip Technology and Evonik Industries
Can any of the company-specific risk be diversified away by investing in both Microchip Technology and Evonik Industries 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 Evonik Industries 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 Evonik Industries AG, you can compare the effects of market volatilities on Microchip Technology and Evonik Industries 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 Evonik Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and Evonik Industries.
Diversification Opportunities for Microchip Technology and Evonik Industries
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Microchip and Evonik is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and Evonik Industries AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evonik Industries 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 Evonik Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evonik Industries has no effect on the direction of Microchip Technology i.e., Microchip Technology and Evonik Industries go up and down completely randomly.
Pair Corralation between Microchip Technology and Evonik Industries
Assuming the 90 days horizon Microchip Technology Incorporated is expected to under-perform the Evonik Industries. In addition to that, Microchip Technology is 3.45 times more volatile than Evonik Industries AG. It trades about -0.14 of its total potential returns per unit of risk. Evonik Industries AG is currently generating about -0.08 per unit of volatility. If you would invest 1,792 in Evonik Industries AG on September 13, 2024 and sell it today you would lose (31.00) from holding Evonik Industries AG or give up 1.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microchip Technology Incorpora vs. Evonik Industries AG
Performance |
| Timeline |
| Microchip Technology |
| Evonik Industries |
Microchip Technology and Evonik Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microchip Technology and Evonik Industries
The main advantage of trading using opposite Microchip Technology and Evonik Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microchip Technology position performs unexpectedly, Evonik Industries 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 Evonik Industries will offset losses from the drop in Evonik Industries' long position.| Microchip Technology vs. KINGBOARD CHEMICAL | Microchip Technology vs. MELIA HOTELS | Microchip Technology vs. Eastman Chemical | Microchip Technology vs. Nissan Chemical Corp |
| Evonik Industries vs. Albemarle | Evonik Industries vs. Superior Plus Corp | Evonik Industries vs. SIVERS SEMICONDUCTORS AB | Evonik Industries vs. Norsk Hydro ASA |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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