Correlation Between Micron Technology and Ford
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Ford 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 Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Ford Motor, you can compare the effects of market volatilities on Micron Technology and Ford 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 Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Ford.
Diversification Opportunities for Micron Technology and Ford
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Micron and Ford is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Micron Technology i.e., Micron Technology and Ford go up and down completely randomly.
Pair Corralation between Micron Technology and Ford
Assuming the 90 days horizon Micron Technology is expected to generate 1.26 times more return on investment than Ford. However, Micron Technology is 1.26 times more volatile than Ford Motor. It trades about 0.07 of its potential returns per unit of risk. Ford Motor is currently generating about 0.02 per unit of risk. If you would invest 95,527 in Micron Technology on September 14, 2024 and sell it today you would earn a total of 110,473 from holding Micron Technology or generate 115.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micron Technology vs. Ford Motor
Performance |
| Timeline |
| Micron Technology |
| Ford Motor |
Micron Technology and Ford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Ford
The main advantage of trading using opposite Micron Technology and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.| Micron Technology vs. United Airlines Holdings | Micron Technology vs. McEwen Mining | Micron Technology vs. Verizon Communications | Micron Technology vs. Grupo Sports World |
| Ford vs. UnitedHealth Group Incorporated | Ford vs. Lloyds Banking Group | Ford vs. Micron Technology | Ford vs. GMxico Transportes SAB |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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