Correlation Between Micron Technology and PUBLIC

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

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

Diversification Opportunities for Micron Technology and PUBLIC

0.07

Correlation Coefficient

Micron Technology  PUBLIC

Significant diversification

The 3 months correlation between Micron and PUBLIC is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and PUBLIC SVC O in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PUBLIC SVC O 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 PUBLIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PUBLIC SVC O has no effect on the direction of Micron Technology i.e., Micron Technology and PUBLIC go up and down completely randomly.

Pair Corralation between Micron Technology and PUBLIC

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 15.73 times less return on investment than PUBLIC. But when comparing it to its historical volatility, Micron Technology is 20.95 times less risky than PUBLIC. It trades about 0.07 of its potential returns per unit of risk. PUBLIC SVC O is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,603  in PUBLIC SVC O on September 14, 2024 and sell it today you would lose (30.00) from holding PUBLIC SVC O or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	64.04%
Values	Daily Returns

Micron Technology  vs.  PUBLIC SVC O

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

PUBLIC SVC O

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PUBLIC SVC O has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PUBLIC 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 PUBLIC

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

The idea behind Micron Technology and PUBLIC SVC O 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.