Correlation Between Micron Technology and ALPS

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

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

Diversification Opportunities for Micron Technology and ALPS

-0.19

Correlation Coefficient

Micron Technology  ALPS

Good diversification

The 3 months correlation between Micron and ALPS is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS 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 ALPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS has no effect on the direction of Micron Technology i.e., Micron Technology and ALPS go up and down completely randomly.

Pair Corralation between Micron Technology and ALPS

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 2.38 times more return on investment than ALPS. However, Micron Technology is 2.38 times more volatile than ALPS. It trades about 0.07 of its potential returns per unit of risk. ALPS is currently generating about 0.06 per unit of risk. If you would invest  4,942  in Micron Technology on September 14, 2024 and sell it today you would earn a total of  5,308  from holding Micron Technology or generate 107.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.53%
Values	Daily Returns

Micron Technology  vs.  ALPS

Micron Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

ALPS

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days ALPS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, ALPS showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and ALPS

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

The idea behind Micron Technology and ALPS 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.