Correlation Between Cirrus Logic and Microchip Technology

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

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

Diversification Opportunities for Cirrus Logic and Microchip Technology

0.24

Correlation Coefficient

Cirrus Logic  Microchip Technology

Modest diversification

The 3 months correlation between Cirrus and Microchip is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Cirrus Logic and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Cirrus Logic 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 Cirrus Logic are associated (or correlated) with Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Cirrus Logic i.e., Cirrus Logic and Microchip Technology go up and down completely randomly.

Pair Corralation between Cirrus Logic and Microchip Technology

Given the investment horizon of 90 days Cirrus Logic is expected to under-perform the Microchip Technology. But the stock apears to be less risky and, when comparing its historical volatility, Cirrus Logic is 1.08 times less risky than Microchip Technology. The stock trades about -0.03 of its potential returns per unit of risk. The Microchip Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,626  in Microchip Technology on February 4, 2024 and sell it today you would earn a total of  510.00  from holding Microchip Technology or generate 5.91% return on investment over 90 days.

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

Cirrus Logic  vs.  Microchip Technology

Cirrus Logic

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cirrus Logic are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cirrus Logic unveiled solid returns over the last few months and may actually be approaching a breakup point.

Microchip Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microchip Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical indicators, Microchip Technology may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Cirrus Logic and Microchip Technology

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

The idea behind Cirrus Logic and Microchip 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.