Correlation Between Microchip Technology and Lindsell Train

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

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

Diversification Opportunities for Microchip Technology and Lindsell Train

0.61

Correlation Coefficient

Microchip Technology  Lindsell Train

Poor diversification

The 3 months correlation between Microchip and Lindsell is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and Lindsell Train Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsell Train Investment 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 Lindsell Train. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsell Train Investment has no effect on the direction of Microchip Technology i.e., Microchip Technology and Lindsell Train go up and down completely randomly.

Pair Corralation between Microchip Technology and Lindsell Train

Assuming the 90 days trading horizon Microchip Technology is expected to under-perform the Lindsell Train. In addition to that, Microchip Technology is 1.67 times more volatile than Lindsell Train Investment. It trades about -0.12 of its total potential returns per unit of risk. Lindsell Train Investment is currently generating about -0.04 per unit of volatility. If you would invest  77,100  in Lindsell Train Investment on September 13, 2024 and sell it today you would lose (3,400) from holding Lindsell Train Investment or give up 4.41% of portfolio value over 90 days.

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

Microchip Technology  vs.  Lindsell Train Investment

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lindsell Train Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lindsell Train Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Lindsell Train is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microchip Technology and Lindsell Train

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

The idea behind Microchip Technology and Lindsell Train Investment 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.