Correlation Between JetBlue Airways and Microchip Technology

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

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

Diversification Opportunities for JetBlue Airways and Microchip Technology

-0.56

Correlation Coefficient

JetBlue Airways  Microchip Technology

Excellent diversification

The 3 months correlation between JetBlue and Microchip is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding JetBlue Airways Corp and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and JetBlue Airways 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 JetBlue Airways Corp 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 JetBlue Airways i.e., JetBlue Airways and Microchip Technology go up and down completely randomly.

Pair Corralation between JetBlue Airways and Microchip Technology

Given the investment horizon of 90 days JetBlue Airways Corp is expected to generate 1.53 times more return on investment than Microchip Technology. However, JetBlue Airways is 1.53 times more volatile than Microchip Technology Incorporated. It trades about 0.05 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.13 per unit of risk. If you would invest  718.00  in JetBlue Airways Corp on October 23, 2024 and sell it today you would earn a total of  46.00  from holding JetBlue Airways Corp or generate 6.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

JetBlue Airways Corp  vs.  Microchip Technology Incorpora

JetBlue Airways Corp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JetBlue Airways Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, JetBlue Airways may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with JetBlue Airways and Microchip Technology

The main advantage of trading using opposite JetBlue Airways and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JetBlue Airways 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 JetBlue Airways Corp 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.