Correlation Between Verizon Communications and Micron Technology
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Micron Technology 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 Verizon Communications and Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Micron Technology, you can compare the effects of market volatilities on Verizon Communications and Micron Technology 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 Verizon Communications with a short position of Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Micron Technology.
Diversification Opportunities for Verizon Communications and Micron Technology
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Verizon and Micron is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and Verizon Communications 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 Verizon Communications are associated (or correlated) with Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Verizon Communications i.e., Verizon Communications and Micron Technology go up and down completely randomly.
Pair Corralation between Verizon Communications and Micron Technology
Assuming the 90 days horizon Verizon Communications is expected to generate 0.57 times more return on investment than Micron Technology. However, Verizon Communications is 1.75 times less risky than Micron Technology. It trades about 0.09 of its potential returns per unit of risk. Micron Technology is currently generating about 0.02 per unit of risk. If you would invest 84,390 in Verizon Communications on August 24, 2024 and sell it today you would earn a total of 2,610 from holding Verizon Communications or generate 3.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Micron Technology
Performance |
| Timeline |
| Verizon Communications |
| Micron Technology |
Verizon Communications and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Micron Technology
The main advantage of trading using opposite Verizon Communications and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology's long position.| Verizon Communications vs. The Select Sector | Verizon Communications vs. Promotora y Operadora | Verizon Communications vs. iShares Global Timber | Verizon Communications vs. SPDR Series Trust |
| Micron Technology vs. NVIDIA | Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. QUALCOMM Incorporated | Micron Technology vs. Advanced Micro Devices |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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