Correlation Between Microchip Technology and ELMOS SEMICONDUCTOR

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

Diversification Opportunities for Microchip Technology and ELMOS SEMICONDUCTOR

0.9

Correlation Coefficient

Microchip Technology  ELMOS SEMICONDUCTOR

Almost no diversification

The 3 months correlation between Microchip and ELMOS is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and ELMOS SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELMOS SEMICONDUCTOR has no effect on the direction of Microchip Technology i.e., Microchip Technology and ELMOS SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between Microchip Technology and ELMOS SEMICONDUCTOR

Assuming the 90 days horizon Microchip Technology is expected to generate 1.21 times less return on investment than ELMOS SEMICONDUCTOR. In addition to that, Microchip Technology is 1.07 times more volatile than ELMOS SEMICONDUCTOR. It trades about 0.21 of its total potential returns per unit of risk. ELMOS SEMICONDUCTOR is currently generating about 0.27 per unit of volatility. If you would invest  5,760  in ELMOS SEMICONDUCTOR on April 25, 2025 and sell it today you would earn a total of  3,570  from holding ELMOS SEMICONDUCTOR or generate 61.98% 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.  ELMOS SEMICONDUCTOR

Microchip Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microchip Technology Incorporated are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Microchip Technology reported solid returns over the last few months and may actually be approaching a breakup point.

ELMOS SEMICONDUCTOR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ELMOS SEMICONDUCTOR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, ELMOS SEMICONDUCTOR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microchip Technology and ELMOS SEMICONDUCTOR

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

The idea behind Microchip Technology Incorporated and ELMOS SEMICONDUCTOR 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.