Correlation Between Micron Technology and Draper Esprit

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

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

Diversification Opportunities for Micron Technology and Draper Esprit

0.41

Correlation Coefficient

Micron Technology  Draper Esprit

Very weak diversification

The 3 months correlation between Micron and Draper is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Draper Esprit plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Draper Esprit plc 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 Draper Esprit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Draper Esprit plc has no effect on the direction of Micron Technology i.e., Micron Technology and Draper Esprit go up and down completely randomly.

Pair Corralation between Micron Technology and Draper Esprit

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.25 times more return on investment than Draper Esprit. However, Micron Technology is 1.25 times more volatile than Draper Esprit plc. It trades about 0.06 of its potential returns per unit of risk. Draper Esprit plc is currently generating about -0.01 per unit of risk. If you would invest  4,988  in Micron Technology on September 23, 2024 and sell it today you would earn a total of  4,024  from holding Micron Technology or generate 80.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.61%
Values	Daily Returns

Micron Technology  vs.  Draper Esprit plc

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 comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Draper Esprit plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Draper Esprit plc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Micron Technology and Draper Esprit

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

The idea behind Micron Technology and Draper Esprit plc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.