Correlation Between Microchip Technology and AviChina Industry

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

Diversification Opportunities for Microchip Technology and AviChina Industry

0.83

Correlation Coefficient

Microchip Technology  AviChina Industry

Very poor diversification

The 3 months correlation between Microchip and AviChina is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and AviChina Industry Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AviChina Industry 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 AviChina Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AviChina Industry has no effect on the direction of Microchip Technology i.e., Microchip Technology and AviChina Industry go up and down completely randomly.

Pair Corralation between Microchip Technology and AviChina Industry

Assuming the 90 days horizon Microchip Technology Incorporated is expected to generate 1.0 times more return on investment than AviChina Industry. However, Microchip Technology is 1.0 times more volatile than AviChina Industry Technology. It trades about 0.22 of its potential returns per unit of risk. AviChina Industry Technology is currently generating about 0.12 per unit of risk. If you would invest  4,095  in Microchip Technology Incorporated on April 24, 2025 and sell it today you would earn a total of  2,104  from holding Microchip Technology Incorporated or generate 51.38% return on investment over 90 days.

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

Microchip Technology Incorpora  vs.  AviChina Industry Technology

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 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Microchip Technology reported solid returns over the last few months and may actually be approaching a breakup point.

AviChina Industry

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AviChina Industry Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AviChina Industry reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microchip Technology and AviChina Industry

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

The idea behind Microchip Technology Incorporated and AviChina Industry 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.