Correlation Between Microchip Technology and Credo Technology

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

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

Diversification Opportunities for Microchip Technology and Credo Technology

0.13

Correlation Coefficient

Microchip Technology  Credo Technology

Average diversification

The 3 months correlation between Microchip and Credo is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and Credo Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Technology 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 Credo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Technology has no effect on the direction of Microchip Technology i.e., Microchip Technology and Credo Technology go up and down completely randomly.

Pair Corralation between Microchip Technology and Credo Technology

Given the investment horizon of 90 days Microchip Technology is expected to generate 0.4 times more return on investment than Credo Technology. However, Microchip Technology is 2.47 times less risky than Credo Technology. It trades about -0.05 of its potential returns per unit of risk. Credo Technology Group is currently generating about -0.08 per unit of risk. If you would invest  5,669  in Microchip Technology on December 29, 2024 and sell it today you would lose (590.00) from holding Microchip Technology or give up 10.41% of portfolio value over 90 days.

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

Microchip Technology  vs.  Credo Technology Group

Microchip Technology

Risk-Adjusted Performance

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 unfluctuating 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.

Credo Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Credo Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Microchip Technology and Credo Technology

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

The idea behind Microchip Technology and Credo Technology Group 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 Stocks Directory module to find actively traded stocks across global markets.