Correlation Between Indie Semiconductor and Microchip Technology

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

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

Diversification Opportunities for Indie Semiconductor and Microchip Technology

-0.39

Correlation Coefficient

Indie Semiconductor  Microchip Technology

Very good diversification

The 3 months correlation between Indie and Microchip is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding indie Semiconductor and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Indie Semiconductor 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 indie Semiconductor 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 Indie Semiconductor i.e., Indie Semiconductor and Microchip Technology go up and down completely randomly.

Pair Corralation between Indie Semiconductor and Microchip Technology

Given the investment horizon of 90 days indie Semiconductor is expected to generate 3.31 times more return on investment than Microchip Technology. However, Indie Semiconductor is 3.31 times more volatile than Microchip Technology. It trades about 0.07 of its potential returns per unit of risk. Microchip Technology is currently generating about 0.01 per unit of risk. If you would invest  410.00  in indie Semiconductor on October 24, 2024 and sell it today you would earn a total of  18.00  from holding indie Semiconductor or generate 4.39% return on investment over 90 days.

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

indie Semiconductor  vs.  Microchip Technology

indie Semiconductor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in indie Semiconductor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Indie Semiconductor demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Indie Semiconductor and Microchip Technology

The main advantage of trading using opposite Indie Semiconductor and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indie Semiconductor 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 indie Semiconductor 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.