Correlation Between Micron Technology and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Verizon Communications 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 Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Verizon Communications, you can compare the effects of market volatilities on Micron Technology and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Verizon Communications.
Diversification Opportunities for Micron Technology and Verizon Communications
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Micron and Verizon is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Micron Technology i.e., Micron Technology and Verizon Communications go up and down completely randomly.
Pair Corralation between Micron Technology and Verizon Communications
Assuming the 90 days horizon Micron Technology is expected to generate 2.25 times less return on investment than Verizon Communications. In addition to that, Micron Technology is 1.75 times more volatile than Verizon Communications. It trades about 0.02 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.09 per unit of volatility. If you would invest 84,390 in Verizon Communications on August 24, 2024 and sell it today you would earn a total of 2,610 from holding Verizon Communications or generate 3.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micron Technology vs. Verizon Communications
Performance |
| Timeline |
| Micron Technology |
| Verizon Communications |
Micron Technology and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Verizon Communications
The main advantage of trading using opposite Micron Technology and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| Micron Technology vs. NVIDIA | Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. QUALCOMM Incorporated | Micron Technology vs. Advanced Micro Devices |
| Verizon Communications vs. The Select Sector | Verizon Communications vs. Promotora y Operadora | Verizon Communications vs. iShares Global Timber | Verizon Communications 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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