Correlation Between Micron Technology and United Airlines
Can any of the company-specific risk be diversified away by investing in both Micron Technology and United Airlines 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 United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and United Airlines Holdings, you can compare the effects of market volatilities on Micron Technology and United Airlines 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 United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and United Airlines.
Diversification Opportunities for Micron Technology and United Airlines
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Micron and United is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Micron Technology i.e., Micron Technology and United Airlines go up and down completely randomly.
Pair Corralation between Micron Technology and United Airlines
Assuming the 90 days trading horizon Micron Technology is expected to generate 12.97 times less return on investment than United Airlines. But when comparing it to its historical volatility, Micron Technology is 1.23 times less risky than United Airlines. It trades about 0.04 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 16,150 in United Airlines Holdings on August 30, 2024 and sell it today you would earn a total of 12,438 from holding United Airlines Holdings or generate 77.02% 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. United Airlines Holdings
Performance |
| Timeline |
| Micron Technology |
| United Airlines Holdings |
Micron Technology and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and United Airlines
The main advantage of trading using opposite Micron Technology and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, United Airlines 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 United Airlines will offset losses from the drop in United Airlines' long position.| Micron Technology vs. Paycom Software | Micron Technology vs. Dell Technologies | Micron Technology vs. Global X Funds | Micron Technology vs. Delta Air Lines |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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