Correlation Between Microchip Technology and Navitas Semiconductor

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

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

Diversification Opportunities for Microchip Technology and Navitas Semiconductor

-0.27

Correlation Coefficient

Microchip Technology  Navitas Semiconductor

Very good diversification

The 3 months correlation between Microchip and Navitas is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology and Navitas Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navitas 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 are associated (or correlated) with Navitas Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navitas Semiconductor has no effect on the direction of Microchip Technology i.e., Microchip Technology and Navitas Semiconductor go up and down completely randomly.

Pair Corralation between Microchip Technology and Navitas Semiconductor

Given the investment horizon of 90 days Microchip Technology is expected to generate 0.67 times more return on investment than Navitas Semiconductor. However, Microchip Technology is 1.48 times less risky than Navitas Semiconductor. It trades about 0.06 of its potential returns per unit of risk. Navitas Semiconductor Corp is currently generating about -0.19 per unit of risk. If you would invest  8,765  in Microchip Technology on January 25, 2024 and sell it today you would earn a total of  219.50  from holding Microchip Technology or generate 2.5% return on investment over 90 days.

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

Microchip Technology  vs.  Navitas Semiconductor Corp

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.

Navitas Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navitas Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microchip Technology and Navitas Semiconductor

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

The idea behind Microchip Technology and Navitas Semiconductor Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.