Correlation Between Advanced Micro and Micron Technology
Can any of the company-specific risk be diversified away by investing in both Advanced Micro 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 Advanced Micro and Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Micro Devices and Micron Technology, you can compare the effects of market volatilities on Advanced Micro 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 Advanced Micro with a short position of Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Micro and Micron Technology.
Diversification Opportunities for Advanced Micro and Micron Technology
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Advanced and Micron is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and Advanced Micro 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 Advanced Micro Devices 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 Advanced Micro i.e., Advanced Micro and Micron Technology go up and down completely randomly.
Pair Corralation between Advanced Micro and Micron Technology
Assuming the 90 days trading horizon Advanced Micro is expected to generate 1.53 times less return on investment than Micron Technology. But when comparing it to its historical volatility, Advanced Micro Devices is 1.01 times less risky than Micron Technology. It trades about 0.05 of its potential returns per unit of risk. Micron Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,296 in Micron Technology on September 12, 2024 and sell it today you would earn a total of 4,527 from holding Micron Technology or generate 85.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.7% |
| Values | Daily Returns |
Advanced Micro Devices vs. Micron Technology
Performance |
| Timeline |
| Advanced Micro Devices |
| Micron Technology |
Advanced Micro and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Micro and Micron Technology
The main advantage of trading using opposite Advanced Micro and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Micro 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.| Advanced Micro vs. Tyson Foods | Advanced Micro vs. Broadcom | Advanced Micro vs. United States Steel | Advanced Micro vs. TAL Education Group |
| Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Broadcom | Micron Technology vs. Advanced Micro Devices | Micron Technology vs. NXP Semiconductors NV |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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