Correlation Between Fidelity Sustainable and Microchip Technology

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

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

Diversification Opportunities for Fidelity Sustainable and Microchip Technology

0.32

Correlation Coefficient

Fidelity Sustainable  Microchip Technology

Weak diversification

The 3 months correlation between Fidelity and Microchip is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Sustainable USD and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Fidelity Sustainable 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 Fidelity Sustainable USD 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 Fidelity Sustainable i.e., Fidelity Sustainable and Microchip Technology go up and down completely randomly.

Pair Corralation between Fidelity Sustainable and Microchip Technology

Assuming the 90 days trading horizon Fidelity Sustainable USD is expected to generate 0.19 times more return on investment than Microchip Technology. However, Fidelity Sustainable USD is 5.35 times less risky than Microchip Technology. It trades about 0.07 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.03 per unit of risk. If you would invest  361.00  in Fidelity Sustainable USD on September 12, 2024 and sell it today you would earn a total of  39.00  from holding Fidelity Sustainable USD or generate 10.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.87%
Values	Daily Returns

Fidelity Sustainable USD  vs.  Microchip Technology

Fidelity Sustainable USD

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Sustainable USD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fidelity Sustainable is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the 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 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.

Pair Trading with Fidelity Sustainable and Microchip Technology

The main advantage of trading using opposite Fidelity Sustainable and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Sustainable 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 Fidelity Sustainable USD 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.