Correlation Between Microchip Technology and Semtech

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

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

Diversification Opportunities for Microchip Technology and Semtech

0.11

Correlation Coefficient

Microchip Technology  Semtech

Average diversification

The 3 months correlation between Microchip and Semtech is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and Semtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semtech 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 Semtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semtech has no effect on the direction of Microchip Technology i.e., Microchip Technology and Semtech go up and down completely randomly.

Pair Corralation between Microchip Technology and Semtech

Given the investment horizon of 90 days Microchip Technology is expected to generate 0.4 times more return on investment than Semtech. However, Microchip Technology is 2.49 times less risky than Semtech. It trades about -0.07 of its potential returns per unit of risk. Semtech is currently generating about -0.08 per unit of risk. If you would invest  5,669  in Microchip Technology on December 30, 2024 and sell it today you would lose (799.00) from holding Microchip Technology or give up 14.09% 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.  Semtech

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

Semtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Microchip Technology and Semtech

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

The idea behind Microchip Technology and Semtech 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 Commodity Directory module to find actively traded commodities issued by global exchanges.