Correlation Between Micron Technology and CVS Health
Can any of the company-specific risk be diversified away by investing in both Micron Technology and CVS Health 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 CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and CVS Health, you can compare the effects of market volatilities on Micron Technology and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and CVS Health.
Diversification Opportunities for Micron Technology and CVS Health
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Micron and CVS is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of Micron Technology i.e., Micron Technology and CVS Health go up and down completely randomly.
Pair Corralation between Micron Technology and CVS Health
Assuming the 90 days trading horizon Micron Technology is expected to generate 1.19 times more return on investment than CVS Health. However, Micron Technology is 1.19 times more volatile than CVS Health. It trades about 0.07 of its potential returns per unit of risk. CVS Health is currently generating about 0.02 per unit of risk. If you would invest 5,438 in Micron Technology on September 2, 2024 and sell it today you would earn a total of 4,231 from holding Micron Technology or generate 77.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.88% |
| Values | Daily Returns |
Micron Technology vs. CVS Health
Performance |
| Timeline |
| Micron Technology |
| CVS Health |
Micron Technology and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and CVS Health
The main advantage of trading using opposite Micron Technology and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Micron Technology vs. American Airlines Group | Micron Technology vs. New Oriental Education | Micron Technology vs. Bread Financial Holdings | Micron Technology vs. Cognizant Technology Solutions |
| CVS Health vs. Fras le SA | CVS Health vs. Western Digital | CVS Health vs. Energisa SA | CVS Health vs. Clave Indices De |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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