Correlation Between Abbott Laboratories and Micron Technology
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories 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 Abbott Laboratories and Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Micron Technology, you can compare the effects of market volatilities on Abbott Laboratories 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 Abbott Laboratories with a short position of Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Micron Technology.
Diversification Opportunities for Abbott Laboratories and Micron Technology
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Abbott and Micron is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and Abbott Laboratories 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 Abbott Laboratories 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 Abbott Laboratories i.e., Abbott Laboratories and Micron Technology go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Micron Technology
Assuming the 90 days trading horizon Abbott Laboratories is expected to generate 4.47 times less return on investment than Micron Technology. But when comparing it to its historical volatility, Abbott Laboratories is 1.76 times less risky than Micron Technology. It trades about 0.02 of its potential returns per unit of risk. Micron Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 107,974 in Micron Technology on September 2, 2024 and sell it today you would earn a total of 90,026 from holding Micron Technology or generate 83.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Abbott Laboratories vs. Micron Technology
Performance |
| Timeline |
| Abbott Laboratories |
| Micron Technology |
Abbott Laboratories and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Micron Technology
The main advantage of trading using opposite Abbott Laboratories and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories 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.| Abbott Laboratories vs. Grupo Sports World | Abbott Laboratories vs. Hoteles City Express | Abbott Laboratories vs. United Airlines Holdings | Abbott Laboratories vs. Ameriprise Financial |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |