Correlation Between Micron Technology and T Mobile

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

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

Diversification Opportunities for Micron Technology and T Mobile

0.65

Correlation Coefficient

Micron Technology  T Mobile

Poor diversification

The 3 months correlation between Micron and T1MU34 is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile 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 T Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Mobile has no effect on the direction of Micron Technology i.e., Micron Technology and T Mobile go up and down completely randomly.

Pair Corralation between Micron Technology and T Mobile

Assuming the 90 days trading horizon Micron Technology is expected to generate 2.37 times more return on investment than T Mobile. However, Micron Technology is 2.37 times more volatile than T Mobile. It trades about 0.14 of its potential returns per unit of risk. T Mobile is currently generating about 0.25 per unit of risk. If you would invest  8,006  in Micron Technology on September 14, 2024 and sell it today you would earn a total of  2,302  from holding Micron Technology or generate 28.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Micron Technology  vs.  T Mobile

Micron Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Micron Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

T Mobile

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, T Mobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and T Mobile

The main advantage of trading using opposite Micron Technology and T Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, T Mobile 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 T Mobile will offset losses from the drop in T Mobile's long position.

The idea behind Micron Technology and T Mobile 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.