Correlation Between ChipMOS Technologies and Microchip Technology

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

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

Diversification Opportunities for ChipMOS Technologies and Microchip Technology

0.95

Correlation Coefficient

ChipMOS Technologies  Microchip Technology

Almost no diversification

The 3 months correlation between ChipMOS and Microchip is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding ChipMOS Technologies and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and ChipMOS Technologies 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 ChipMOS Technologies 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 ChipMOS Technologies i.e., ChipMOS Technologies and Microchip Technology go up and down completely randomly.

Pair Corralation between ChipMOS Technologies and Microchip Technology

Given the investment horizon of 90 days ChipMOS Technologies is expected to under-perform the Microchip Technology. But the stock apears to be less risky and, when comparing its historical volatility, ChipMOS Technologies is 1.38 times less risky than Microchip Technology. The stock trades about -0.11 of its potential returns per unit of risk. The Microchip Technology is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  7,636  in Microchip Technology on September 4, 2024 and sell it today you would lose (605.00) from holding Microchip Technology or give up 7.92% of portfolio value over 90 days.

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

ChipMOS Technologies  vs.  Microchip Technology

ChipMOS Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChipMOS Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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. Even with latest inconsistent performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with ChipMOS Technologies and Microchip Technology

The main advantage of trading using opposite ChipMOS Technologies and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChipMOS Technologies 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 ChipMOS Technologies 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.