Correlation Between Sligro Food and Microchip Technology

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

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

Diversification Opportunities for Sligro Food and Microchip Technology

0.84

Correlation Coefficient

Sligro Food  Microchip Technology

Very poor diversification

The 3 months correlation between Sligro and Microchip is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sligro Food Group and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Sligro Food 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 Sligro Food Group 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 Sligro Food i.e., Sligro Food and Microchip Technology go up and down completely randomly.

Pair Corralation between Sligro Food and Microchip Technology

Assuming the 90 days trading horizon Sligro Food Group is expected to under-perform the Microchip Technology. But the stock apears to be less risky and, when comparing its historical volatility, Sligro Food Group is 1.66 times less risky than Microchip Technology. The stock trades about -0.1 of its potential returns per unit of risk. The Microchip Technology is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  8,740  in Microchip Technology on September 4, 2024 and sell it today you would lose (1,853) from holding Microchip Technology or give up 21.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.2%
Values	Daily Returns

Sligro Food Group  vs.  Microchip Technology

Sligro Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sligro Food Group 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.

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 latest uncertain 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.

Pair Trading with Sligro Food and Microchip Technology

The main advantage of trading using opposite Sligro Food and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sligro Food 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 Sligro Food Group 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.