Correlation Between Micron Technology and Defense Metals
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Defense Metals 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 Defense Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Defense Metals Corp, you can compare the effects of market volatilities on Micron Technology and Defense Metals 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 Defense Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Defense Metals.
Diversification Opportunities for Micron Technology and Defense Metals
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Micron and Defense is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Defense Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defense Metals Corp 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 Defense Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defense Metals Corp has no effect on the direction of Micron Technology i.e., Micron Technology and Defense Metals go up and down completely randomly.
Pair Corralation between Micron Technology and Defense Metals
Allowing for the 90-day total investment horizon Micron Technology is expected to generate 0.5 times more return on investment than Defense Metals. However, Micron Technology is 1.99 times less risky than Defense Metals. It trades about 0.05 of its potential returns per unit of risk. Defense Metals Corp is currently generating about 0.01 per unit of risk. If you would invest 6,113 in Micron Technology on October 13, 2024 and sell it today you would earn a total of 3,821 from holding Micron Technology or generate 62.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Micron Technology vs. Defense Metals Corp
Performance |
| Timeline |
| Micron Technology |
| Defense Metals Corp |
Micron Technology and Defense Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Defense Metals
The main advantage of trading using opposite Micron Technology and Defense Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Defense Metals 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 Defense Metals will offset losses from the drop in Defense Metals' long position.| Micron Technology vs. NVIDIA | Micron Technology vs. Intel | Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Marvell Technology Group |
| Defense Metals vs. Ucore Rare Metals | Defense Metals vs. Canada Rare Earth | Defense Metals vs. Stillwater Critical Minerals |
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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