Correlation Between Microchip Technology and Sunny Optical

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

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

Diversification Opportunities for Microchip Technology and Sunny Optical

0.57

Correlation Coefficient

Microchip Technology  Sunny Optical

Very weak diversification

The 3 months correlation between Microchip and Sunny is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and Sunny Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Optical 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 Sunny Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Optical Technology has no effect on the direction of Microchip Technology i.e., Microchip Technology and Sunny Optical go up and down completely randomly.

Pair Corralation between Microchip Technology and Sunny Optical

Assuming the 90 days trading horizon Microchip Technology is expected to generate 1.13 times more return on investment than Sunny Optical. However, Microchip Technology is 1.13 times more volatile than Sunny Optical Technology. It trades about 0.34 of its potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.13 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	Weak
Accuracy	100.0%
Values	Daily Returns

Microchip Technology  vs.  Sunny Optical Technology

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.

Sunny Optical Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sunny Optical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microchip Technology and Sunny Optical

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

The idea behind Microchip Technology and Sunny Optical Technology 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.