Correlation Between Infineon Technologies and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Infineon Technologies 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 Infineon Technologies and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Infineon Technologies AG and Microchip Technology, you can compare the effects of market volatilities on Infineon Technologies 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 Infineon Technologies with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infineon Technologies and Microchip Technology.
Diversification Opportunities for Infineon Technologies and Microchip Technology
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Infineon and Microchip is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Infineon Technologies AG and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Infineon Technologies 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 Infineon Technologies AG 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 Infineon Technologies i.e., Infineon Technologies and Microchip Technology go up and down completely randomly.
Pair Corralation between Infineon Technologies and Microchip Technology
Assuming the 90 days horizon Infineon Technologies AG is expected to generate 1.08 times more return on investment than Microchip Technology. However, Infineon Technologies is 1.08 times more volatile than Microchip Technology. It trades about 0.0 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.06 per unit of risk. If you would invest 3,499 in Infineon Technologies AG on November 4, 2024 and sell it today you would lose (174.00) from holding Infineon Technologies AG or give up 4.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Infineon Technologies AG vs. Microchip Technology
Performance |
| Timeline |
| Infineon Technologies |
| Microchip Technology |
Infineon Technologies and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Infineon Technologies and Microchip Technology
The main advantage of trading using opposite Infineon Technologies and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infineon Technologies 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 Infineon Technologies AG 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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Check out your portfolio center.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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