Correlation Between SBA Communications and Micron Technology
Can any of the company-specific risk be diversified away by investing in both SBA Communications and Micron 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 SBA Communications and Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBA Communications Corp and Micron Technology, you can compare the effects of market volatilities on SBA Communications and Micron 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 SBA Communications with a short position of Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBA Communications and Micron Technology.
Diversification Opportunities for SBA Communications and Micron Technology
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between SBA and Micron is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and SBA Communications 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 SBA Communications Corp are associated (or correlated) with Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of SBA Communications i.e., SBA Communications and Micron Technology go up and down completely randomly.
Pair Corralation between SBA Communications and Micron Technology
Assuming the 90 days trading horizon SBA Communications Corp is expected to under-perform the Micron Technology. But the stock apears to be less risky and, when comparing its historical volatility, SBA Communications Corp is 1.59 times less risky than Micron Technology. The stock trades about -0.04 of its potential returns per unit of risk. The Micron Technology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 9,841 in Micron Technology on August 29, 2024 and sell it today you would lose (220.00) from holding Micron Technology or give up 2.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBA Communications Corp vs. Micron Technology
Performance |
| Timeline |
| SBA Communications Corp |
| Micron Technology |
SBA Communications and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBA Communications and Micron Technology
The main advantage of trading using opposite SBA Communications and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBA Communications position performs unexpectedly, Micron 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 Micron Technology will offset losses from the drop in Micron Technology's long position.| SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc |
| Micron Technology vs. Apple Inc | Micron Technology vs. Apple Inc | Micron Technology vs. Apple Inc | Micron Technology vs. Apple Inc |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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