Correlation Between Micron Technology and Bridgestone

Can any of the company-specific risk be diversified away by investing in both Micron Technology and Bridgestone 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 Bridgestone into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Micron Technology and Bridgestone, you can compare the effects of market volatilities on Micron Technology and Bridgestone 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 Bridgestone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Bridgestone.

Diversification Opportunities for Micron Technology and Bridgestone

0.01

Correlation Coefficient

Micron Technology  Bridgestone

Significant diversification

The 3 months correlation between Micron and Bridgestone is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone 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 Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of Micron Technology i.e., Micron Technology and Bridgestone go up and down completely randomly.

Pair Corralation between Micron Technology and Bridgestone

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Bridgestone. But the stock apears to be less risky and, when comparing its historical volatility, Micron Technology is 1.6 times less risky than Bridgestone. The stock trades about -0.08 of its potential returns per unit of risk. The Bridgestone is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,020  in Bridgestone on September 26, 2024 and sell it today you would lose (720.00) from holding Bridgestone or give up 17.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Micron Technology  vs.  Bridgestone

Micron Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Micron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bridgestone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgestone has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Micron Technology and Bridgestone

The main advantage of trading using opposite Micron Technology and Bridgestone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Bridgestone 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 Bridgestone will offset losses from the drop in Bridgestone's long position.

The idea behind Micron Technology and Bridgestone 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.