Correlation Between Microchip Technology and Qualcomm

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

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

Diversification Opportunities for Microchip Technology and Qualcomm

0.25

Correlation Coefficient

Microchip Technology  Qualcomm

Modest diversification

The 3 months correlation between Microchip and Qualcomm is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and Qualcomm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qualcomm 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 Incorporated are associated (or correlated) with Qualcomm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qualcomm has no effect on the direction of Microchip Technology i.e., Microchip Technology and Qualcomm go up and down completely randomly.

Pair Corralation between Microchip Technology and Qualcomm

Assuming the 90 days trading horizon Microchip Technology Incorporated is expected to under-perform the Qualcomm. In addition to that, Microchip Technology is 1.23 times more volatile than Qualcomm. It trades about -0.1 of its total potential returns per unit of risk. Qualcomm is currently generating about -0.06 per unit of volatility. If you would invest  8,165  in Qualcomm on December 27, 2024 and sell it today you would lose (612.00) from holding Qualcomm or give up 7.5% of portfolio value over 90 days.

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

Microchip Technology Incorpora  vs.  Qualcomm

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

Qualcomm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qualcomm has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Microchip Technology and Qualcomm

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

The idea behind Microchip Technology Incorporated and Qualcomm 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.