Correlation Between Microchip Technology and NH HOTEL

Can any of the company-specific risk be diversified away by investing in both Microchip Technology and NH HOTEL 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 NH HOTEL 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 NH HOTEL GROUP, you can compare the effects of market volatilities on Microchip Technology and NH HOTEL 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 NH HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and NH HOTEL.

Diversification Opportunities for Microchip Technology and NH HOTEL

-0.06

Correlation Coefficient

Microchip Technology  NH HOTEL

Good diversification

The 3 months correlation between Microchip and NH5 is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and NH HOTEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH HOTEL GROUP 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 NH HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH HOTEL GROUP has no effect on the direction of Microchip Technology i.e., Microchip Technology and NH HOTEL go up and down completely randomly.

Pair Corralation between Microchip Technology and NH HOTEL

Assuming the 90 days horizon Microchip Technology Incorporated is expected to under-perform the NH HOTEL. But the stock apears to be less risky and, when comparing its historical volatility, Microchip Technology Incorporated is 1.46 times less risky than NH HOTEL. The stock trades about -0.04 of its potential returns per unit of risk. The NH HOTEL GROUP is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  393.00  in NH HOTEL GROUP on September 3, 2024 and sell it today you would earn a total of  18.00  from holding NH HOTEL GROUP or generate 4.58% return on investment over 90 days.

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

Microchip Technology Incorpora  vs.  NH HOTEL GROUP

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 nearly stable basic indicators, Microchip Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NH HOTEL GROUP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NH HOTEL GROUP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, NH HOTEL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microchip Technology and NH HOTEL

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

The idea behind Microchip Technology Incorporated and NH HOTEL GROUP 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.