Correlation Between Micron Technology and Battery Future

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Can any of the company-specific risk be diversified away by investing in both Micron Technology and Battery Future 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 Battery Future into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Battery Future Acquisition, you can compare the effects of market volatilities on Micron Technology and Battery Future 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 Battery Future. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Battery Future.

Diversification Opportunities for Micron Technology and Battery Future

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Micron and Battery is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Battery Future Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Battery Future Acqui 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 Battery Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Battery Future Acqui has no effect on the direction of Micron Technology i.e., Micron Technology and Battery Future go up and down completely randomly.

Pair Corralation between Micron Technology and Battery Future

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 11.35 times more return on investment than Battery Future. However, Micron Technology is 11.35 times more volatile than Battery Future Acquisition. It trades about 0.12 of its potential returns per unit of risk. Battery Future Acquisition is currently generating about 0.13 per unit of risk. If you would invest  8,725  in Micron Technology on September 18, 2024 and sell it today you would earn a total of  2,101  from holding Micron Technology or generate 24.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Micron Technology  vs.  Battery Future Acquisition

 Performance 
       Timeline  
Micron Technology 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.
Battery Future Acqui 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Battery Future Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Battery Future is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Micron Technology and Battery Future Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Micron Technology and Battery Future

The main advantage of trading using opposite Micron Technology and Battery Future positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Battery Future 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 Battery Future will offset losses from the drop in Battery Future's long position.
The idea behind Micron Technology and Battery Future Acquisition pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Battery Future as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Battery Future's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Battery Future's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Battery Future Acquisition.
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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