Correlation Between Entegris and Microchip Technology

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

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

Diversification Opportunities for Entegris and Microchip Technology

0.4

Correlation Coefficient

Entegris  Microchip Technology

Very weak diversification

The 3 months correlation between Entegris and Microchip is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Entegris and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Entegris 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 Entegris 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 Entegris i.e., Entegris and Microchip Technology go up and down completely randomly.

Pair Corralation between Entegris and Microchip Technology

Given the investment horizon of 90 days Entegris is expected to under-perform the Microchip Technology. But the stock apears to be less risky and, when comparing its historical volatility, Entegris is 1.04 times less risky than Microchip Technology. The stock trades about -0.05 of its potential returns per unit of risk. The Microchip Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,196  in Microchip Technology on January 19, 2024 and sell it today you would earn a total of  311.00  from holding Microchip Technology or generate 3.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Entegris  vs.  Microchip Technology

Entegris

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Entegris are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Entegris may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Microchip Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microchip Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Microchip Technology is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Entegris and Microchip Technology

The main advantage of trading using opposite Entegris and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entegris 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 Entegris 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.