Correlation Between Micron Technology and Nasdaq
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Nasdaq 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 Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Nasdaq Inc, you can compare the effects of market volatilities on Micron Technology and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Nasdaq.
Diversification Opportunities for Micron Technology and Nasdaq
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Micron and Nasdaq is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Micron Technology i.e., Micron Technology and Nasdaq go up and down completely randomly.
Pair Corralation between Micron Technology and Nasdaq
Assuming the 90 days trading horizon Micron Technology is expected to generate 1.92 times less return on investment than Nasdaq. In addition to that, Micron Technology is 2.33 times more volatile than Nasdaq Inc. It trades about 0.06 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.25 per unit of volatility. If you would invest 22,843 in Nasdaq Inc on September 13, 2024 and sell it today you would earn a total of 1,457 from holding Nasdaq Inc or generate 6.38% 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. Nasdaq Inc
Performance |
| Timeline |
| Micron Technology |
| Nasdaq Inc |
Micron Technology and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Nasdaq
The main advantage of trading using opposite Micron Technology and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq's long position.| Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Broadcom | Micron Technology vs. Advanced Micro Devices | Micron Technology vs. NXP Semiconductors NV |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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