Correlation Between Impinj and AAP

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

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

Diversification Opportunities for Impinj and AAP

0.46

Correlation Coefficient

Impinj  AAP

Very weak diversification

The 3 months correlation between Impinj and AAP is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Impinj Inc and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP Inc 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 AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of Impinj i.e., Impinj and AAP go up and down completely randomly.

Pair Corralation between Impinj and AAP

Allowing for the 90-day total investment horizon Impinj Inc is expected to under-perform the AAP. But the stock apears to be less risky and, when comparing its historical volatility, Impinj Inc is 9.04 times less risky than AAP. The stock trades about -0.07 of its potential returns per unit of risk. The AAP Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.05  in AAP Inc on September 13, 2024 and sell it today you would lose (0.03) from holding AAP Inc or give up 60.0% of portfolio value over 90 days.

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

Impinj Inc  vs.  AAP Inc

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 latest unfluctuating performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

AAP Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AAP Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AAP revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impinj and AAP

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

The idea behind Impinj Inc and AAP Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.