Correlation Between Microchip Technology and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both Microchip Technology and Sterling Construction 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 Sterling Construction 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 Sterling Construction, you can compare the effects of market volatilities on Microchip Technology and Sterling Construction 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 Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and Sterling Construction.
Diversification Opportunities for Microchip Technology and Sterling Construction
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microchip and Sterling is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of Microchip Technology i.e., Microchip Technology and Sterling Construction go up and down completely randomly.
Pair Corralation between Microchip Technology and Sterling Construction
Assuming the 90 days horizon Microchip Technology Incorporated is expected to under-perform the Sterling Construction. But the stock apears to be less risky and, when comparing its historical volatility, Microchip Technology Incorporated is 1.43 times less risky than Sterling Construction. The stock trades about -0.01 of its potential returns per unit of risk. The Sterling Construction is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,560 in Sterling Construction on December 4, 2024 and sell it today you would earn a total of 7,905 from holding Sterling Construction or generate 222.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microchip Technology Incorpora vs. Sterling Construction
Performance |
| Timeline |
| Microchip Technology |
| Sterling Construction |
Microchip Technology and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microchip Technology and Sterling Construction
The main advantage of trading using opposite Microchip Technology and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microchip Technology position performs unexpectedly, Sterling Construction 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 Sterling Construction will offset losses from the drop in Sterling Construction's long position.| Microchip Technology vs. Samsung Electronics Co | Microchip Technology vs. Electronic Arts | Microchip Technology vs. STMicroelectronics NV | Microchip Technology vs. Nanjing Panda Electronics |
| Sterling Construction vs. NTT DATA | Sterling Construction vs. SALESFORCE INC CDR | Sterling Construction vs. SIDETRADE EO 1 | Sterling Construction vs. Tradegate AG Wertpapierhandelsbank |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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