Correlation Between Microchip Technology and Citigroup

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

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

Diversification Opportunities for Microchip Technology and Citigroup

0.91

Correlation Coefficient

Microchip Technology  Citigroup

Almost no diversification

The 3 months correlation between Microchip and Citigroup is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup 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 Incorporated are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Microchip Technology i.e., Microchip Technology and Citigroup go up and down completely randomly.

Pair Corralation between Microchip Technology and Citigroup

Assuming the 90 days trading horizon Microchip Technology Incorporated is expected to generate 1.9 times more return on investment than Citigroup. However, Microchip Technology is 1.9 times more volatile than Citigroup. It trades about 0.32 of its potential returns per unit of risk. Citigroup is currently generating about 0.34 per unit of risk. If you would invest  12,044  in Microchip Technology Incorporated on April 23, 2025 and sell it today you would earn a total of  8,767  from holding Microchip Technology Incorporated or generate 72.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Microchip Technology Incorpora  vs.  Citigroup

Microchip Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microchip Technology Incorporated are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Microchip Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Citigroup

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Citigroup sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microchip Technology and Citigroup

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

The idea behind Microchip Technology Incorporated and Citigroup 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.