Correlation Between Microchip Technology and Bank of Ireland Group PLC

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

By analyzing existing cross correlation between Microchip Technology and Bank of Ireland, you can compare the effects of market volatilities on Microchip Technology and Bank of Ireland Group PLC 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 Bank of Ireland Group PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and Bank of Ireland Group PLC.

Diversification Opportunities for Microchip Technology and Bank of Ireland Group PLC

-0.28

Correlation Coefficient

Microchip Technology  Bank of Ireland Group PLC

Very good diversification

The 3 months correlation between Microchip and Bank is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and Bank of Ireland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Ireland Group PLC 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 are associated (or correlated) with Bank of Ireland Group PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Ireland Group PLC has no effect on the direction of Microchip Technology i.e., Microchip Technology and Bank of Ireland Group PLC go up and down completely randomly.

Pair Corralation between Microchip Technology and Bank of Ireland Group PLC

Assuming the 90 days trading horizon Microchip Technology is expected to under-perform the Bank of Ireland Group PLC. In addition to that, Microchip Technology is 1.38 times more volatile than Bank of Ireland. It trades about -0.07 of its total potential returns per unit of risk. Bank of Ireland is currently generating about 0.27 per unit of volatility. If you would invest  843.00  in Bank of Ireland on December 3, 2024 and sell it today you would earn a total of  293.00  from holding Bank of Ireland or generate 34.76% return on investment over 90 days.

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

Microchip Technology  vs.  Bank of Ireland

Microchip Technology

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bank of Ireland Group PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Ireland are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Bank of Ireland Group PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microchip Technology and Bank of Ireland Group PLC

The main advantage of trading using opposite Microchip Technology and Bank of Ireland Group PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microchip Technology position performs unexpectedly, Bank of Ireland Group PLC 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 Bank of Ireland Group PLC will offset losses from the drop in Bank of Ireland Group PLC's long position.

The idea behind Microchip Technology and Bank of Ireland 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.