Correlation Between American Public and Micron Technology
Can any of the company-specific risk be diversified away by investing in both American Public 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 American Public and Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Public Education and Micron Technology, you can compare the effects of market volatilities on American Public 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 American Public with a short position of Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Public and Micron Technology.
Diversification Opportunities for American Public and Micron Technology
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and Micron is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and American Public 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 American Public Education 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 American Public i.e., American Public and Micron Technology go up and down completely randomly.
Pair Corralation between American Public and Micron Technology
Assuming the 90 days horizon American Public Education is expected to generate 1.1 times more return on investment than Micron Technology. However, American Public is 1.1 times more volatile than Micron Technology. It trades about 0.08 of its potential returns per unit of risk. Micron Technology is currently generating about -0.04 per unit of risk. If you would invest 1,620 in American Public Education on December 12, 2024 and sell it today you would earn a total of 370.00 from holding American Public Education or generate 22.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Public Education vs. Micron Technology
Performance |
| Timeline |
| American Public Education |
| Micron Technology |
American Public and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Public and Micron Technology
The main advantage of trading using opposite American Public and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public 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.| American Public vs. MEDCAW INVESTMENTS LS 01 | ||
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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