Correlation Between Digi International and Microchip Technology

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

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

Diversification Opportunities for Digi International and Microchip Technology

0.55

Correlation Coefficient

Digi International  Microchip Technology

Very weak diversification

The 3 months correlation between Digi and Microchip is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and Digi International 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 Digi International 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 Digi International i.e., Digi International and Microchip Technology go up and down completely randomly.

Pair Corralation between Digi International and Microchip Technology

Given the investment horizon of 90 days Digi International is expected to under-perform the Microchip Technology. But the stock apears to be less risky and, when comparing its historical volatility, Digi International is 1.14 times less risky than Microchip Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Microchip Technology Incorporated is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,740  in Microchip Technology Incorporated on May 20, 2025 and sell it today you would earn a total of  376.00  from holding Microchip Technology Incorporated or generate 6.55% return on investment over 90 days.

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

Digi International  vs.  Microchip Technology Incorpora

Digi International

Risk-Adjusted Performance

Weakest

Over the last 90 days Digi International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Digi International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Microchip Technology

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Microchip Technology Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Microchip Technology may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Digi International and Microchip Technology

The main advantage of trading using opposite Digi International and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digi International 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 Digi International and Microchip Technology Incorporated 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.