Correlation Between Impinj and Microchip Technology

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

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

Diversification Opportunities for Impinj and Microchip Technology

0.88

Correlation Coefficient

Impinj  Microchip Technology

Very poor diversification

The 3 months correlation between Impinj and Microchip is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Impinj Inc and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Impinj 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 Impinj Inc 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 Impinj i.e., Impinj and Microchip Technology go up and down completely randomly.

Pair Corralation between Impinj and Microchip Technology

Allowing for the 90-day total investment horizon Impinj Inc is expected to generate 1.61 times more return on investment than Microchip Technology. However, Impinj is 1.61 times more volatile than Microchip Technology. It trades about 0.05 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.01 per unit of risk. If you would invest  8,629  in Impinj Inc on September 25, 2024 and sell it today you would earn a total of  6,019  from holding Impinj Inc or generate 69.75% return on investment over 90 days.

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

Impinj Inc  vs.  Microchip Technology

Impinj Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impinj Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 unfluctuating performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Impinj and Microchip Technology

The main advantage of trading using opposite Impinj and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Impinj 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 Impinj Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.