Correlation Between Microchip Technology and Ross Stores

Can any of the company-specific risk be diversified away by investing in both Microchip Technology and Ross Stores 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 Ross Stores 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 Ross Stores, you can compare the effects of market volatilities on Microchip Technology and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and Ross Stores.

Diversification Opportunities for Microchip Technology and Ross Stores

-0.64

Correlation Coefficient

Microchip Technology  Ross Stores

Excellent diversification

The 3 months correlation between Microchip and Ross is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Microchip Technology i.e., Microchip Technology and Ross Stores go up and down completely randomly.

Pair Corralation between Microchip Technology and Ross Stores

Assuming the 90 days trading horizon Microchip Technology Incorporated is expected to generate 1.33 times more return on investment than Ross Stores. However, Microchip Technology is 1.33 times more volatile than Ross Stores. It trades about 0.28 of its potential returns per unit of risk. Ross Stores is currently generating about -0.08 per unit of risk. If you would invest  13,217  in Microchip Technology Incorporated on April 24, 2025 and sell it today you would earn a total of  7,383  from holding Microchip Technology Incorporated or generate 55.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Microchip Technology Incorpora  vs.  Ross Stores

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 21 (%) 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.

Ross Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Microchip Technology and Ross Stores

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

The idea behind Microchip Technology Incorporated and Ross Stores 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.