Correlation Between Micron Technology and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Iridium 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 Iridium 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 Iridium Communications, you can compare the effects of market volatilities on Micron Technology and Iridium 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Iridium Communications.
Diversification Opportunities for Micron Technology and Iridium Communications
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Micron and Iridium is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Micron Technology i.e., Micron Technology and Iridium Communications go up and down completely randomly.
Pair Corralation between Micron Technology and Iridium Communications
Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.24 times more return on investment than Iridium Communications. However, Micron Technology is 1.24 times more volatile than Iridium Communications. It trades about 0.05 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.03 per unit of risk. If you would invest 7,464 in Micron Technology on September 3, 2024 and sell it today you would earn a total of 2,391 from holding Micron Technology or generate 32.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micron Technology vs. Iridium Communications
Performance |
| Timeline |
| Micron Technology |
| Iridium Communications |
Micron Technology and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Iridium Communications
The main advantage of trading using opposite Micron Technology and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Iridium 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| Micron Technology vs. NVIDIA | Micron Technology vs. Intel | Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Marvell Technology Group |
| Iridium Communications vs. IHS Holding | Iridium Communications vs. Cogent Communications Group | Iridium Communications vs. IDT Corporation | Iridium Communications vs. Cable One |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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