Correlation Between Micron Technology and ELECOM CO
Can any of the company-specific risk be diversified away by investing in both Micron Technology and ELECOM CO 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 Micron Technology and ELECOM CO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and ELECOM LTD, you can compare the effects of market volatilities on Micron Technology and ELECOM CO 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 Micron Technology with a short position of ELECOM CO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and ELECOM CO.
Diversification Opportunities for Micron Technology and ELECOM CO
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Micron and ELECOM is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and ELECOM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECOM LTD and Micron Technology 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 Micron Technology are associated (or correlated) with ELECOM CO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECOM LTD has no effect on the direction of Micron Technology i.e., Micron Technology and ELECOM CO go up and down completely randomly.
Pair Corralation between Micron Technology and ELECOM CO
Assuming the 90 days trading horizon Micron Technology is expected to generate 3.68 times less return on investment than ELECOM CO. In addition to that, Micron Technology is 2.75 times more volatile than ELECOM LTD. It trades about 0.02 of its total potential returns per unit of risk. ELECOM LTD is currently generating about 0.2 per unit of volatility. If you would invest 840.00 in ELECOM LTD on September 2, 2024 and sell it today you would earn a total of 40.00 from holding ELECOM LTD or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micron Technology vs. ELECOM LTD
Performance |
| Timeline |
| Micron Technology |
| ELECOM LTD |
Micron Technology and ELECOM CO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and ELECOM CO
The main advantage of trading using opposite Micron Technology and ELECOM CO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, ELECOM CO 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 ELECOM CO will offset losses from the drop in ELECOM CO's long position.| Micron Technology vs. Apple Inc | Micron Technology vs. Apple Inc | Micron Technology vs. Apple Inc | Micron Technology vs. Apple Inc |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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