Correlation Between Micron Technology and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Basic Materials 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 Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Basic Materials, you can compare the effects of market volatilities on Micron Technology and Basic Materials 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 Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Basic Materials.
Diversification Opportunities for Micron Technology and Basic Materials
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Micron and Basic is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Micron Technology i.e., Micron Technology and Basic Materials go up and down completely randomly.
Pair Corralation between Micron Technology and Basic Materials
Assuming the 90 days trading horizon Micron Technology is expected to under-perform the Basic Materials. In addition to that, Micron Technology is 3.24 times more volatile than Basic Materials. It trades about -0.04 of its total potential returns per unit of risk. Basic Materials is currently generating about 0.06 per unit of volatility. If you would invest 570,087 in Basic Materials on August 26, 2024 and sell it today you would earn a total of 6,154 from holding Basic Materials or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Micron Technology vs. Basic Materials
Performance |
| Timeline |
Micron Technology and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
Micron Technology
Pair trading matchups for Micron Technology
Basic Materials
Pair trading matchups for Basic Materials
Pair Trading with Micron Technology and Basic Materials
The main advantage of trading using opposite Micron Technology and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.| Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Broadcom | Micron Technology vs. NXP Semiconductors NV | Micron Technology vs. STMicroelectronics NV |
| Basic Materials vs. Prudential Financial | Basic Materials vs. G2D Investments | Basic Materials vs. Micron Technology | Basic Materials vs. CVS Health |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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