Correlation Between Micron Technology and Mastercard Incorporated
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Mastercard Incorporated 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 Mastercard Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Mastercard Incorporated, you can compare the effects of market volatilities on Micron Technology and Mastercard Incorporated 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 Mastercard Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Mastercard Incorporated.
Diversification Opportunities for Micron Technology and Mastercard Incorporated
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Micron and Mastercard is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated 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 Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of Micron Technology i.e., Micron Technology and Mastercard Incorporated go up and down completely randomly.
Pair Corralation between Micron Technology and Mastercard Incorporated
Assuming the 90 days horizon Micron Technology is expected to generate 2.22 times more return on investment than Mastercard Incorporated. However, Micron Technology is 2.22 times more volatile than Mastercard Incorporated. It trades about 0.06 of its potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.08 per unit of risk. If you would invest 107,974 in Micron Technology on September 3, 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micron Technology vs. Mastercard Incorporated
Performance |
| Timeline |
| Micron Technology |
| Mastercard Incorporated |
Micron Technology and Mastercard Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Mastercard Incorporated
The main advantage of trading using opposite Micron Technology and Mastercard Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Mastercard Incorporated 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 Mastercard Incorporated will offset losses from the drop in Mastercard Incorporated's long position.The idea behind Micron Technology and Mastercard Incorporated pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Mastercard Incorporated vs. Costco Wholesale | Mastercard Incorporated vs. Lloyds Banking Group | Mastercard Incorporated vs. McEwen Mining | Mastercard Incorporated vs. Genworth 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |