Correlation Between Microsoft and Micron Technology
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Micron Technology, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Micron Technology.
Diversification Opportunities for Microsoft and Micron Technology
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and Micron is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Micron Technology go up and down completely randomly.
Pair Corralation between Microsoft and Micron Technology
Given the investment horizon of 90 days Microsoft is expected to generate 0.41 times more return on investment than Micron Technology. However, Microsoft is 2.46 times less risky than Micron Technology. It trades about -0.04 of its potential returns per unit of risk. Micron Technology is currently generating about -0.07 per unit of risk. If you would invest 41,484 in Microsoft on January 14, 2025 and sell it today you would lose (2,639) from holding Microsoft or give up 6.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Micron Technology
Performance |
| Timeline |
| Microsoft |
| Micron Technology |
Microsoft and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Micron Technology
The main advantage of trading using opposite Microsoft and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Crowdstrike Holdings | Microsoft vs. Okta Inc | Microsoft vs. Cloudflare | Microsoft vs. MongoDB |
| Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Marvell Technology Group | Micron Technology vs. NVIDIA | Micron Technology vs. Broadcom |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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