Correlation Between SMA Solar and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both SMA Solar 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 SMA Solar and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA Solar Technology and Microchip Technology Incorporated, you can compare the effects of market volatilities on SMA Solar 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 SMA Solar with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Microchip Technology.
Diversification Opportunities for SMA Solar and Microchip Technology
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SMA and Microchip is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and SMA Solar 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 SMA Solar Technology 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 SMA Solar i.e., SMA Solar and Microchip Technology go up and down completely randomly.
Pair Corralation between SMA Solar and Microchip Technology
Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the Microchip Technology. In addition to that, SMA Solar is 2.46 times more volatile than Microchip Technology Incorporated. It trades about -0.12 of its total potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.02 per unit of volatility. If you would invest 6,825 in Microchip Technology Incorporated on September 4, 2024 and sell it today you would lose (97.00) from holding Microchip Technology Incorporated or give up 1.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. Microchip Technology Incorpora
Performance |
| Timeline |
| SMA Solar Technology |
| Microchip Technology |
SMA Solar and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Microchip Technology
The main advantage of trading using opposite SMA Solar and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar 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.| SMA Solar vs. Hyatt Hotels | SMA Solar vs. Meli Hotels International | SMA Solar vs. Xenia Hotels Resorts | SMA Solar vs. ANTA SPORTS PRODUCT |
| Microchip Technology vs. NVIDIA | Microchip Technology vs. Taiwan Semiconductor Manufacturing | Microchip Technology vs. Advanced Micro Devices | Microchip Technology vs. Intel |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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