Correlation Between Micron Technology and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Eastman Chemical 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 Micron Technology and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Eastman Chemical Co, you can compare the effects of market volatilities on Micron Technology and Eastman Chemical 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 Micron Technology with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Eastman Chemical.
Diversification Opportunities for Micron Technology and Eastman Chemical
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Micron and Eastman is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Eastman Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Micron Technology 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 Micron Technology are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Micron Technology i.e., Micron Technology and Eastman Chemical go up and down completely randomly.
Pair Corralation between Micron Technology and Eastman Chemical
Assuming the 90 days trading horizon Micron Technology is expected to generate 5.4 times more return on investment than Eastman Chemical. However, Micron Technology is 5.4 times more volatile than Eastman Chemical Co. It trades about 0.02 of its potential returns per unit of risk. Eastman Chemical Co is currently generating about -0.54 per unit of risk. If you would invest 10,135 in Micron Technology on October 12, 2024 and sell it today you would lose (186.00) from holding Micron Technology or give up 1.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Micron Technology vs. Eastman Chemical Co
Performance |
| Timeline |
| Micron Technology |
| Eastman Chemical |
Micron Technology and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Eastman Chemical
The main advantage of trading using opposite Micron Technology and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.| Micron Technology vs. Smarttech247 Group PLC | Micron Technology vs. Liontrust Asset Management | Micron Technology vs. Global Net Lease | Micron Technology vs. British American Tobacco |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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