Correlation Between Levi Strauss and Micron Technology

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

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

Diversification Opportunities for Levi Strauss and Micron Technology

0.22

Correlation Coefficient

Levi Strauss  Micron Technology

Modest diversification

The 3 months correlation between Levi and Micron is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Levi Strauss Co and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and Levi Strauss 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 Levi Strauss Co 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 Levi Strauss i.e., Levi Strauss and Micron Technology go up and down completely randomly.

Pair Corralation between Levi Strauss and Micron Technology

Given the investment horizon of 90 days Levi Strauss is expected to generate 1.64 times less return on investment than Micron Technology. But when comparing it to its historical volatility, Levi Strauss Co is 4.01 times less risky than Micron Technology. It trades about 0.1 of its potential returns per unit of risk. Micron Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,797  in Micron Technology on October 11, 2024 and sell it today you would earn a total of  144.00  from holding Micron Technology or generate 1.47% return on investment over 90 days.

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

Levi Strauss Co  vs.  Micron Technology

Levi Strauss

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Levi Strauss is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

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. In spite of comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Levi Strauss and Micron Technology

The main advantage of trading using opposite Levi Strauss and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Levi Strauss 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 Levi Strauss Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.