Correlation Between Micron Technology and EAGLE MATERIALS

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

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

Diversification Opportunities for Micron Technology and EAGLE MATERIALS

0.51

Correlation Coefficient

Micron Technology  EAGLE MATERIALS

Very weak diversification

The 3 months correlation between Micron and EAGLE is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS and Micron Technology 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 Micron Technology are associated (or correlated) with EAGLE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAGLE MATERIALS has no effect on the direction of Micron Technology i.e., Micron Technology and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between Micron Technology and EAGLE MATERIALS

Assuming the 90 days trading horizon Micron Technology is expected to generate 2.57 times more return on investment than EAGLE MATERIALS. However, Micron Technology is 2.57 times more volatile than EAGLE MATERIALS. It trades about -0.1 of its potential returns per unit of risk. EAGLE MATERIALS is currently generating about -0.36 per unit of risk. If you would invest  10,414  in Micron Technology on October 7, 2024 and sell it today you would lose (1,679) from holding Micron Technology or give up 16.12% of portfolio value over 90 days.

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

Micron Technology  vs.  EAGLE MATERIALS

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.

EAGLE MATERIALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EAGLE MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Micron Technology and EAGLE MATERIALS

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

The idea behind Micron Technology and EAGLE MATERIALS 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.