Correlation Between Microchip Technology and X FAB

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

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

Diversification Opportunities for Microchip Technology and X FAB

0.94

Correlation Coefficient

Microchip Technology  X FAB

Almost no diversification

The 3 months correlation between Microchip and 0ROZ is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Microchip Technology i.e., Microchip Technology and X FAB go up and down completely randomly.

Pair Corralation between Microchip Technology and X FAB

Assuming the 90 days trading horizon Microchip Technology is expected to generate 1.23 times more return on investment than X FAB. However, Microchip Technology is 1.23 times more volatile than X FAB Silicon Foundries. It trades about 0.34 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about 0.32 per unit of risk. If you would invest  3,980  in Microchip Technology on April 20, 2025 and sell it today you would earn a total of  3,487  from holding Microchip Technology or generate 87.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Microchip Technology  vs.  X FAB Silicon Foundries

Microchip Technology

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microchip Technology are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Microchip Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

X FAB Silicon

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, X FAB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microchip Technology and X FAB

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

The idea behind Microchip Technology and X FAB Silicon Foundries 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.