Correlation Between Microchip Technology and Corning Incorporated

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

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

Diversification Opportunities for Microchip Technology and Corning Incorporated

-0.52

Correlation Coefficient

Microchip Technology  Corning Incorporated

Excellent diversification

The 3 months correlation between Microchip and Corning is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and Corning Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corning Incorporated 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 Corning Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corning Incorporated has no effect on the direction of Microchip Technology i.e., Microchip Technology and Corning Incorporated go up and down completely randomly.

Pair Corralation between Microchip Technology and Corning Incorporated

Given the investment horizon of 90 days Microchip Technology is expected to under-perform the Corning Incorporated. In addition to that, Microchip Technology is 1.52 times more volatile than Corning Incorporated. It trades about -0.07 of its total potential returns per unit of risk. Corning Incorporated is currently generating about 0.22 per unit of volatility. If you would invest  4,043  in Corning Incorporated on September 1, 2024 and sell it today you would earn a total of  824.00  from holding Corning Incorporated or generate 20.38% return on investment over 90 days.

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

Microchip Technology  vs.  Corning Incorporated

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.

Corning Incorporated

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Corning Incorporated are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Corning Incorporated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microchip Technology and Corning Incorporated

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

The idea behind Microchip Technology and Corning 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.