Correlation Between Micron Technology and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Alibaba Group 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 Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Alibaba Group Holding, you can compare the effects of market volatilities on Micron Technology and Alibaba Group 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 Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Alibaba Group.
Diversification Opportunities for Micron Technology and Alibaba Group
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Micron and Alibaba is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding 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 Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Micron Technology i.e., Micron Technology and Alibaba Group go up and down completely randomly.
Pair Corralation between Micron Technology and Alibaba Group
Assuming the 90 days trading horizon Micron Technology is expected to under-perform the Alibaba Group. In addition to that, Micron Technology is 1.47 times more volatile than Alibaba Group Holding. It trades about -0.01 of its total potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.09 per unit of volatility. If you would invest 1,420 in Alibaba Group Holding on August 30, 2024 and sell it today you would earn a total of 400.00 from holding Alibaba Group Holding or generate 28.17% 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. Alibaba Group Holding
Performance |
| Timeline |
| Micron Technology |
| Alibaba Group Holding |
Micron Technology and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Alibaba Group
The main advantage of trading using opposite Micron Technology and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Alibaba Group 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 Alibaba Group will offset losses from the drop in Alibaba Group's long position.| Micron Technology vs. Paycom Software | Micron Technology vs. Dell Technologies | Micron Technology vs. Global X Funds | Micron Technology vs. Delta Air Lines |
| Alibaba Group vs. Take Two Interactive Software | Alibaba Group vs. Fidelity National Information | Alibaba Group vs. Micron Technology | Alibaba Group vs. G2D Investments |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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