Correlation Between Microchip Technology and International Biotechnology

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

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

Diversification Opportunities for Microchip Technology and International Biotechnology

-0.25

Correlation Coefficient

Microchip Technology  International Biotechnology

Very good diversification

The 3 months correlation between Microchip and International is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and International Biotechnology Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Biotechnology 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 International Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Biotechnology has no effect on the direction of Microchip Technology i.e., Microchip Technology and International Biotechnology go up and down completely randomly.

Pair Corralation between Microchip Technology and International Biotechnology

Assuming the 90 days trading horizon Microchip Technology is expected to under-perform the International Biotechnology. In addition to that, Microchip Technology is 1.86 times more volatile than International Biotechnology Trust. It trades about -0.11 of its total potential returns per unit of risk. International Biotechnology Trust is currently generating about 0.03 per unit of volatility. If you would invest  68,400  in International Biotechnology Trust on August 31, 2024 and sell it today you would earn a total of  1,600  from holding International Biotechnology Trust or generate 2.34% 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.  International Biotechnology Tr

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.

International Biotechnology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Biotechnology Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, International Biotechnology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microchip Technology and International Biotechnology

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

The idea behind Microchip Technology and International Biotechnology Trust 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.