Correlation Between Design Therapeutics and MICRON

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

By analyzing existing cross correlation between Design Therapeutics and MICRON TECHNOLOGY INC, you can compare the effects of market volatilities on Design Therapeutics and MICRON 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 Design Therapeutics with a short position of MICRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Design Therapeutics and MICRON.

Diversification Opportunities for Design Therapeutics and MICRON

-0.45

Correlation Coefficient

Design Therapeutics  MICRON

Very good diversification

The 3 months correlation between Design and MICRON is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and MICRON TECHNOLOGY INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MICRON TECHNOLOGY INC and Design Therapeutics 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 Design Therapeutics are associated (or correlated) with MICRON. 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 INC has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and MICRON go up and down completely randomly.

Pair Corralation between Design Therapeutics and MICRON

Given the investment horizon of 90 days Design Therapeutics is expected to generate 10.32 times more return on investment than MICRON. However, Design Therapeutics is 10.32 times more volatile than MICRON TECHNOLOGY INC. It trades about 0.12 of its potential returns per unit of risk. MICRON TECHNOLOGY INC is currently generating about -0.18 per unit of risk. If you would invest  468.00  in Design Therapeutics on October 9, 2024 and sell it today you would earn a total of  163.00  from holding Design Therapeutics or generate 34.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Design Therapeutics  vs.  MICRON TECHNOLOGY INC

Design Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Design Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

MICRON TECHNOLOGY INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MICRON TECHNOLOGY INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MICRON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Design Therapeutics and MICRON

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

The idea behind Design Therapeutics and MICRON TECHNOLOGY INC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.