Correlation Between Microchip Technology and Penta Ocean

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

Diversification Opportunities for Microchip Technology and Penta Ocean

0.79

Correlation Coefficient

Microchip Technology  Penta Ocean

Poor diversification

The 3 months correlation between Microchip and Penta is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc 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 Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of Microchip Technology i.e., Microchip Technology and Penta Ocean go up and down completely randomly.

Pair Corralation between Microchip Technology and Penta Ocean

Assuming the 90 days horizon Microchip Technology Incorporated is expected to generate 1.82 times more return on investment than Penta Ocean. However, Microchip Technology is 1.82 times more volatile than Penta Ocean Construction Co. It trades about 0.22 of its potential returns per unit of risk. Penta Ocean Construction Co is currently generating about 0.1 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	Significant
Accuracy	100.0%
Values	Daily Returns

Microchip Technology Incorpora  vs.  Penta Ocean Construction Co

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.

Penta Ocean Construc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penta Ocean may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Microchip Technology and Penta Ocean

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

The idea behind Microchip Technology Incorporated and Penta Ocean Construction Co 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.