Correlation Between Micron Technology and Cumberland Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Cumberland Pharmaceuticals, you can compare the effects of market volatilities on Micron Technology and Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Cumberland Pharmaceuticals.
Diversification Opportunities for Micron Technology and Cumberland Pharmaceuticals
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Micron and Cumberland is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cumberland Pharmaceuticals has no effect on the direction of Micron Technology i.e., Micron Technology and Cumberland Pharmaceuticals go up and down completely randomly.
Pair Corralation between Micron Technology and Cumberland Pharmaceuticals
Allowing for the 90-day total investment horizon Micron Technology is expected to generate 0.8 times more return on investment than Cumberland Pharmaceuticals. However, Micron Technology is 1.26 times less risky than Cumberland Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about -0.01 per unit of risk. If you would invest 7,746 in Micron Technology on September 4, 2024 and sell it today you would earn a total of 2,109 from holding Micron Technology or generate 27.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Micron Technology vs. Cumberland Pharmaceuticals
Performance |
| Timeline |
| Micron Technology |
| Cumberland Pharmaceuticals |
Micron Technology and Cumberland Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Cumberland Pharmaceuticals
The main advantage of trading using opposite Micron Technology and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals will offset losses from the drop in Cumberland Pharmaceuticals' 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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