Correlation Between Ameriprise Financial and Micron Technology

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

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

Diversification Opportunities for Ameriprise Financial and Micron Technology

0.5

Correlation Coefficient

Ameriprise Financial  Micron Technology

Very weak diversification

The 3 months correlation between Ameriprise and Micron is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and Ameriprise Financial 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 Ameriprise Financial 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 Ameriprise Financial i.e., Ameriprise Financial and Micron Technology go up and down completely randomly.

Pair Corralation between Ameriprise Financial and Micron Technology

Assuming the 90 days trading horizon Ameriprise Financial is expected to generate 0.43 times more return on investment than Micron Technology. However, Ameriprise Financial is 2.32 times less risky than Micron Technology. It trades about 0.19 of its potential returns per unit of risk. Micron Technology is currently generating about -0.04 per unit of risk. If you would invest  73,299  in Ameriprise Financial on September 27, 2024 and sell it today you would earn a total of  10,331  from holding Ameriprise Financial or generate 14.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

Ameriprise Financial  vs.  Micron Technology

Ameriprise Financial

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Ameriprise Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

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. Despite somewhat strong basic indicators, Micron Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ameriprise Financial and Micron Technology

The main advantage of trading using opposite Ameriprise Financial and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise Financial 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 Ameriprise Financial 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.