Correlation Between Micron Technology and American Beacon

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

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

Diversification Opportunities for Micron Technology and American Beacon

0.27

Correlation Coefficient

Micron Technology  American Beacon

Modest diversification

The 3 months correlation between Micron and American is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and American Beacon Sim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Sim 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Sim has no effect on the direction of Micron Technology i.e., Micron Technology and American Beacon go up and down completely randomly.

Pair Corralation between Micron Technology and American Beacon

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the American Beacon. In addition to that, Micron Technology is 18.34 times more volatile than American Beacon Sim. It trades about -0.07 of its total potential returns per unit of risk. American Beacon Sim is currently generating about 0.24 per unit of volatility. If you would invest  884.00  in American Beacon Sim on September 15, 2024 and sell it today you would earn a total of  50.00  from holding American Beacon Sim or generate 5.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Micron Technology  vs.  American Beacon Sim

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 uncertain basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

American Beacon Sim

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Sim are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, American Beacon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Micron Technology and American Beacon

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

The idea behind Micron Technology and American Beacon Sim 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.