Correlation Between Micron Technology and Baidu
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Baidu 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 Baidu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Baidu Inc, you can compare the effects of market volatilities on Micron Technology and Baidu 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 Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Baidu.
Diversification Opportunities for Micron Technology and Baidu
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Micron and Baidu is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc 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 Baidu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baidu Inc has no effect on the direction of Micron Technology i.e., Micron Technology and Baidu go up and down completely randomly.
Pair Corralation between Micron Technology and Baidu
Assuming the 90 days horizon Micron Technology is expected to generate 1.01 times more return on investment than Baidu. However, Micron Technology is 1.01 times more volatile than Baidu Inc. It trades about 0.11 of its potential returns per unit of risk. Baidu Inc is currently generating about 0.05 per unit of risk. If you would invest 169,409 in Micron Technology on September 12, 2024 and sell it today you would earn a total of 36,591 from holding Micron Technology or generate 21.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micron Technology vs. Baidu Inc
Performance |
| Timeline |
| Micron Technology |
| Baidu Inc |
Micron Technology and Baidu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Baidu
The main advantage of trading using opposite Micron Technology and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Baidu 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 Baidu will offset losses from the drop in Baidu's long position.| Micron Technology vs. New Oriental Education | Micron Technology vs. Martin Marietta Materials | Micron Technology vs. Southwest Airlines | Micron Technology vs. Taiwan Semiconductor Manufacturing |
| Baidu vs. Southwest Airlines | Baidu vs. McEwen Mining | Baidu vs. Verizon Communications | Baidu vs. Southern Copper |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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