Correlation Between Chuangs China and Microchip Technology

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

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

Diversification Opportunities for Chuangs China and Microchip Technology

0.0

Correlation Coefficient

Chuangs China  Microchip Technology

Pay attention - limited upside

The 3 months correlation between Chuangs and Microchip is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Chuangs China 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 Chuangs China Investments 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 Chuangs China i.e., Chuangs China and Microchip Technology go up and down completely randomly.

Pair Corralation between Chuangs China and Microchip Technology

If you would invest  5,209  in Microchip Technology Incorporated on December 2, 2024 and sell it today you would earn a total of  300.00  from holding Microchip Technology Incorporated or generate 5.76% return on investment over 90 days.

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

Chuangs China Investments  vs.  Microchip Technology Incorpora

Chuangs China Investments

Risk-Adjusted Performance

Very Weak

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

Microchip Technology

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Chuangs China and Microchip Technology

The main advantage of trading using opposite Chuangs China and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chuangs China 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 Chuangs China Investments 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.