Correlation Between Trane Technologies and Micron Technology

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

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

Diversification Opportunities for Trane Technologies and Micron Technology

-0.13

Correlation Coefficient

Trane Technologies  Micron Technology

Good diversification

The 3 months correlation between Trane and Micron is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and Trane Technologies 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 Trane Technologies plc 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 Trane Technologies i.e., Trane Technologies and Micron Technology go up and down completely randomly.

Pair Corralation between Trane Technologies and Micron Technology

Assuming the 90 days trading horizon Trane Technologies plc is expected to under-perform the Micron Technology. But the stock apears to be less risky and, when comparing its historical volatility, Trane Technologies plc is 2.88 times less risky than Micron Technology. The stock trades about -0.04 of its potential returns per unit of risk. The Micron Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  9,110  in Micron Technology on October 26, 2024 and sell it today you would earn a total of  1,218  from holding Micron Technology or generate 13.37% return on investment over 90 days.

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

Trane Technologies plc  vs.  Micron Technology

Trane Technologies plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Trane Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Micron Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Trane Technologies and Micron Technology

The main advantage of trading using opposite Trane Technologies and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trane Technologies 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 Trane Technologies plc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.