Correlation Between Microchip Technology and Molson Coors

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

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

Diversification Opportunities for Microchip Technology and Molson Coors

-0.84

Correlation Coefficient

Microchip Technology  Molson Coors

Pay attention - limited upside

The 3 months correlation between Microchip and Molson is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Incorporated are associated (or correlated) with Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Microchip Technology i.e., Microchip Technology and Molson Coors go up and down completely randomly.

Pair Corralation between Microchip Technology and Molson Coors

Assuming the 90 days trading horizon Microchip Technology Incorporated is expected to under-perform the Molson Coors. In addition to that, Microchip Technology is 1.73 times more volatile than Molson Coors Beverage. It trades about -0.11 of its total potential returns per unit of risk. Molson Coors Beverage is currently generating about -0.06 per unit of volatility. If you would invest  33,386  in Molson Coors Beverage on October 7, 2024 and sell it today you would lose (3,486) from holding Molson Coors Beverage or give up 10.44% of portfolio value over 90 days.

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

Microchip Technology Incorpora  vs.  Molson Coors Beverage

Microchip Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microchip Technology Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Molson Coors Beverage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Molson Coors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microchip Technology and Molson Coors

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

The idea behind Microchip Technology Incorporated and Molson Coors Beverage 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.