Correlation Between Micron Technology and Amazon
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Amazon Inc, you can compare the effects of market volatilities on Micron Technology and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Amazon.
Diversification Opportunities for Micron Technology and Amazon
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Micron and Amazon is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Micron Technology i.e., Micron Technology and Amazon go up and down completely randomly.
Pair Corralation between Micron Technology and Amazon
Allowing for the 90-day total investment horizon Micron Technology is expected to generate 2.42 times less return on investment than Amazon. But when comparing it to its historical volatility, Micron Technology is 1.03 times less risky than Amazon. It trades about 0.06 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 14,008 in Amazon Inc on September 12, 2024 and sell it today you would earn a total of 7,890 from holding Amazon Inc or generate 56.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 36.56% |
| Values | Daily Returns |
Micron Technology vs. Amazon Inc
Performance |
| Timeline |
| Micron Technology |
| Amazon Inc |
Micron Technology and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Amazon
The main advantage of trading using opposite Micron Technology and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Micron Technology vs. NVIDIA | Micron Technology vs. Intel | Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Marvell Technology Group |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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