Correlation Between Microchip Technology and Sitime

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Can any of the company-specific risk be diversified away by investing in both Microchip Technology and Sitime 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 Sitime into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microchip Technology and Sitime, you can compare the effects of market volatilities on Microchip Technology and Sitime 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 Sitime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and Sitime.

Diversification Opportunities for Microchip Technology and Sitime

-0.85
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Microchip and Sitime is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and Sitime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitime 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 Sitime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitime has no effect on the direction of Microchip Technology i.e., Microchip Technology and Sitime go up and down completely randomly.

Pair Corralation between Microchip Technology and Sitime

Given the investment horizon of 90 days Microchip Technology is expected to under-perform the Sitime. But the stock apears to be less risky and, when comparing its historical volatility, Microchip Technology is 1.54 times less risky than Sitime. The stock trades about -0.17 of its potential returns per unit of risk. The Sitime is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  16,791  in Sitime on September 19, 2024 and sell it today you would earn a total of  8,055  from holding Sitime or generate 47.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Microchip Technology  vs.  Sitime

 Performance 
       Timeline  
Microchip Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 weak performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
Sitime 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sitime are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Sitime displayed solid returns over the last few months and may actually be approaching a breakup point.

Microchip Technology and Sitime Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microchip Technology and Sitime

The main advantage of trading using opposite Microchip Technology and Sitime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microchip Technology position performs unexpectedly, Sitime 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 Sitime will offset losses from the drop in Sitime's long position.
The idea behind Microchip Technology and Sitime 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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