Correlation Between Micron Technology and SPDR SP

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

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

Diversification Opportunities for Micron Technology and SPDR SP

0.01

Correlation Coefficient

Micron Technology  SPDR SP

Significant diversification

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

Pair Corralation between Micron Technology and SPDR SP

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 15.43 times less return on investment than SPDR SP. In addition to that, Micron Technology is 4.36 times more volatile than SPDR SP Communication. It trades about 0.0 of its total potential returns per unit of risk. SPDR SP Communication is currently generating about 0.3 per unit of volatility. If you would invest  3,420  in SPDR SP Communication on September 21, 2024 and sell it today you would earn a total of  637.00  from holding SPDR SP Communication or generate 18.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Micron Technology  vs.  SPDR SP Communication

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR SP Communication

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Communication are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SPDR SP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and SPDR SP

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

The idea behind Micron Technology and SPDR SP Communication 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.