Correlation Between T Mobile and Micron Technology

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

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

Diversification Opportunities for T Mobile and Micron Technology

0.65

Correlation Coefficient

T Mobile  Micron Technology

Poor diversification

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

Pair Corralation between T Mobile and Micron Technology

Assuming the 90 days trading horizon T Mobile is expected to generate 1.29 times less return on investment than Micron Technology. But when comparing it to its historical volatility, T Mobile is 2.37 times less risky than Micron Technology. It trades about 0.25 of its potential returns per unit of risk. Micron Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. 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

T Mobile  vs.  Micron Technology

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.

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.

Pair Trading with T Mobile and Micron Technology

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

The idea behind T Mobile and Micron Technology 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.