Correlation Between Carnegie Clean and Microchip Technology

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Can any of the company-specific risk be diversified away by investing in both Carnegie Clean 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 Carnegie Clean and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carnegie Clean Energy and Microchip Technology Incorporated, you can compare the effects of market volatilities on Carnegie Clean 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 Carnegie Clean with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnegie Clean and Microchip Technology.

Diversification Opportunities for Carnegie Clean and Microchip Technology

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Carnegie and Microchip is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Carnegie Clean Energy and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Carnegie Clean 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 Carnegie Clean Energy 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 Carnegie Clean i.e., Carnegie Clean and Microchip Technology go up and down completely randomly.

Pair Corralation between Carnegie Clean and Microchip Technology

Assuming the 90 days trading horizon Carnegie Clean is expected to generate 1.25 times less return on investment than Microchip Technology. In addition to that, Carnegie Clean is 1.39 times more volatile than Microchip Technology Incorporated. It trades about 0.16 of its total potential returns per unit of risk. Microchip Technology Incorporated is currently generating about 0.27 per unit of volatility. If you would invest  3,633  in Microchip Technology Incorporated on April 23, 2025 and sell it today you would earn a total of  2,774  from holding Microchip Technology Incorporated or generate 76.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Carnegie Clean Energy  vs.  Microchip Technology Incorpora

 Performance 
       Timeline  
Carnegie Clean Energy 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Carnegie Clean Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Carnegie Clean reported solid returns over the last few months and may actually be approaching a breakup point.
Microchip Technology 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Microchip Technology Incorporated are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Microchip Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Carnegie Clean and Microchip Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carnegie Clean and Microchip Technology

The main advantage of trading using opposite Carnegie Clean and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnegie Clean 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 Carnegie Clean Energy and Microchip Technology Incorporated 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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