Correlation Between Neometals and Microchip Technology

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

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

Diversification Opportunities for Neometals and Microchip Technology

0.19

Correlation Coefficient

Neometals  Microchip Technology

Average diversification

The 3 months correlation between Neometals and Microchip is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Neometals and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Neometals 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 Neometals 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 Neometals i.e., Neometals and Microchip Technology go up and down completely randomly.

Pair Corralation between Neometals and Microchip Technology

Assuming the 90 days trading horizon Neometals is expected to generate 0.66 times more return on investment than Microchip Technology. However, Neometals is 1.52 times less risky than Microchip Technology. It trades about 0.01 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.14 per unit of risk. If you would invest  475.00  in Neometals on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Neometals or generate 0.0% return on investment over 90 days.

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

Neometals  vs.  Microchip Technology

Neometals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Neometals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Neometals exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Neometals and Microchip Technology

The main advantage of trading using opposite Neometals and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neometals 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 Neometals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.