Correlation Between Micron Technology and Sextant Bond

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Can any of the company-specific risk be diversified away by investing in both Micron Technology and Sextant Bond 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 Sextant Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Sextant Bond Income, you can compare the effects of market volatilities on Micron Technology and Sextant Bond 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 Sextant Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Sextant Bond.

Diversification Opportunities for Micron Technology and Sextant Bond

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Micron and Sextant is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Sextant Bond Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sextant Bond Income 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 Sextant Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sextant Bond Income has no effect on the direction of Micron Technology i.e., Micron Technology and Sextant Bond go up and down completely randomly.

Pair Corralation between Micron Technology and Sextant Bond

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 7.53 times more return on investment than Sextant Bond. However, Micron Technology is 7.53 times more volatile than Sextant Bond Income. It trades about 0.04 of its potential returns per unit of risk. Sextant Bond Income is currently generating about 0.02 per unit of risk. If you would invest  8,182  in Micron Technology on September 14, 2024 and sell it today you would earn a total of  1,935  from holding Micron Technology or generate 23.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Micron Technology  vs.  Sextant Bond Income

 Performance 
       Timeline  
Micron Technology 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.
Sextant Bond Income 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sextant Bond Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Sextant Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Micron Technology and Sextant Bond Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Micron Technology and Sextant Bond

The main advantage of trading using opposite Micron Technology and Sextant Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Sextant Bond 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 Sextant Bond will offset losses from the drop in Sextant Bond's long position.
The idea behind Micron Technology and Sextant Bond Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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