Correlation Between Micron Technology and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Prudential Financial 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 Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Prudential Financial, you can compare the effects of market volatilities on Micron Technology and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Prudential Financial.
Diversification Opportunities for Micron Technology and Prudential Financial
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Micron and Prudential is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Micron Technology i.e., Micron Technology and Prudential Financial go up and down completely randomly.
Pair Corralation between Micron Technology and Prudential Financial
Assuming the 90 days horizon Micron Technology is expected to generate 9.95 times more return on investment than Prudential Financial. However, Micron Technology is 9.95 times more volatile than Prudential Financial. It trades about 0.02 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.22 per unit of risk. If you would invest 207,733 in Micron Technology on August 24, 2024 and sell it today you would earn a total of 1,282 from holding Micron Technology or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Micron Technology vs. Prudential Financial
Performance |
| Timeline |
| Micron Technology |
| Prudential Financial |
Micron Technology and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Prudential Financial
The main advantage of trading using opposite Micron Technology and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| Micron Technology vs. NVIDIA | Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. QUALCOMM Incorporated | Micron Technology vs. Advanced Micro Devices |
| Prudential Financial vs. The Select Sector | Prudential Financial vs. Promotora y Operadora | Prudential Financial vs. iShares Global Timber | Prudential Financial vs. SPDR Series Trust |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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