Correlation Between CVR Energy and Microchip Technology

Can any of the company-specific risk be diversified away by investing in both CVR Energy 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 CVR Energy and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVR Energy and Microchip Technology, you can compare the effects of market volatilities on CVR Energy 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 CVR Energy with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVR Energy and Microchip Technology.

Diversification Opportunities for CVR Energy and Microchip Technology

0.64

Correlation Coefficient

CVR Energy  Microchip Technology

Poor diversification

The 3 months correlation between CVR and Microchip is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and CVR Energy 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 CVR Energy 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 CVR Energy i.e., CVR Energy and Microchip Technology go up and down completely randomly.

Pair Corralation between CVR Energy and Microchip Technology

Assuming the 90 days trading horizon CVR Energy is expected to generate 1.61 times more return on investment than Microchip Technology. However, CVR Energy is 1.61 times more volatile than Microchip Technology. It trades about 0.18 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.18 per unit of risk. If you would invest  1,687  in CVR Energy on August 31, 2024 and sell it today you would earn a total of  259.00  from holding CVR Energy or generate 15.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CVR Energy  vs.  Microchip Technology

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Microchip Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microchip Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with CVR Energy and Microchip Technology

The main advantage of trading using opposite CVR Energy and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Energy 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.

The idea behind CVR Energy and Microchip Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.