Correlation Between Check Point and Microchip Technology

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

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

Diversification Opportunities for Check Point and Microchip Technology

0.44

Correlation Coefficient

Check Point  Microchip Technology

Very weak diversification

The 3 months correlation between Check and Microchip is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Check Point 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 Check Point Software are associated (or correlated) with Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Check Point i.e., Check Point and Microchip Technology go up and down completely randomly.

Pair Corralation between Check Point and Microchip Technology

Assuming the 90 days trading horizon Check Point is expected to generate 16.54 times less return on investment than Microchip Technology. But when comparing it to its historical volatility, Check Point Software is 1.96 times less risky than Microchip Technology. It trades about 0.04 of its potential returns per unit of risk. Microchip Technology is currently generating about 0.34 of returns per unit of risk over similar time horizon. 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	96.83%
Values	Daily Returns

Check Point Software  vs.  Microchip Technology

Check Point Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Check Point is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Check Point and Microchip Technology

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

The idea behind Check Point Software and Microchip 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.