To calculate the best accuracy of a magnetic rotary encoder system the total system needs to be considered. As mentioned before the quality of the mechanical assembly is very important. This includes the air gap, tilt of the axis, xy-displacement of IC center point and shaft axis, the bearings and the behavior over the complete temperature range. Also the diameter and quality of the magnet relates to the total accuracy of the system. The non-linearity and the temperature drift of the IC has to be added too. To get the best accuracy, take the averaging of the measurements and compensate the non-linearity and temperature drift by software in the microcontroller.