Correlation Between Microchip Technology and LeapFrog Enterprises

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

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

Diversification Opportunities for Microchip Technology and LeapFrog Enterprises

0.0

Correlation Coefficient

Microchip Technology  LeapFrog Enterprises

Pay attention - limited upside

The 3 months correlation between Microchip and LeapFrog is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and LeapFrog Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LeapFrog Enterprises 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 are associated (or correlated) with LeapFrog Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LeapFrog Enterprises has no effect on the direction of Microchip Technology i.e., Microchip Technology and LeapFrog Enterprises go up and down completely randomly.

Pair Corralation between Microchip Technology and LeapFrog Enterprises

If you would invest  8,757  in Microchip Technology on February 5, 2024 and sell it today you would earn a total of  379.00  from holding Microchip Technology or generate 4.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microchip Technology  vs.  LeapFrog Enterprises

Microchip Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microchip Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical indicators, Microchip Technology may actually be approaching a critical reversion point that can send shares even higher in June 2024.

LeapFrog Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LeapFrog Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, LeapFrog Enterprises is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microchip Technology and LeapFrog Enterprises

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

The idea behind Microchip Technology and LeapFrog Enterprises 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.