Correlation Between Intel and Microchip Technology

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

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

Diversification Opportunities for Intel and Microchip Technology

-0.26

Correlation Coefficient

Intel  Microchip Technology

Very good diversification

The 3 months correlation between Intel and Microchip is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Intel 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 Intel 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 Intel i.e., Intel and Microchip Technology go up and down completely randomly.

Pair Corralation between Intel and Microchip Technology

Assuming the 90 days trading horizon Intel is expected to generate 1.37 times more return on investment than Microchip Technology. However, Intel is 1.37 times more volatile than Microchip Technology Incorporated. It trades about 0.06 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.09 per unit of risk. If you would invest  1,750  in Intel on September 12, 2024 and sell it today you would earn a total of  184.00  from holding Intel or generate 10.51% return on investment over 90 days.

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

Intel  vs.  Microchip Technology Incorpora

Intel

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Intel unveiled 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 Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Intel and Microchip Technology

The main advantage of trading using opposite Intel and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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 Intel 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.