Correlation Between Micron Technology and Leggett Platt
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Leggett Platt 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 Leggett Platt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Leggett Platt, you can compare the effects of market volatilities on Micron Technology and Leggett Platt 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 Leggett Platt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Leggett Platt.
Diversification Opportunities for Micron Technology and Leggett Platt
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Micron and Leggett is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Leggett Platt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leggett Platt 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 Leggett Platt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leggett Platt has no effect on the direction of Micron Technology i.e., Micron Technology and Leggett Platt go up and down completely randomly.
Pair Corralation between Micron Technology and Leggett Platt
Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Leggett Platt. But the stock apears to be less risky and, when comparing its historical volatility, Micron Technology is 1.36 times less risky than Leggett Platt. The stock trades about -0.12 of its potential returns per unit of risk. The Leggett Platt is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,204 in Leggett Platt on September 12, 2024 and sell it today you would lose (35.00) from holding Leggett Platt or give up 2.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Micron Technology vs. Leggett Platt
Performance |
| Timeline |
| Micron Technology |
| Leggett Platt |
Micron Technology and Leggett Platt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Leggett Platt
The main advantage of trading using opposite Micron Technology and Leggett Platt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Leggett Platt 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 Leggett Platt will offset losses from the drop in Leggett Platt's long position.| Micron Technology vs. NVIDIA | Micron Technology vs. Intel | Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Marvell Technology Group |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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