Correlation Between Micron Technology and AECOM TECHNOLOGY

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

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

Diversification Opportunities for Micron Technology and AECOM TECHNOLOGY

0.73

Correlation Coefficient

Micron Technology  AECOM TECHNOLOGY

Poor diversification

The 3 months correlation between Micron and AECOM is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and AECOM TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM TECHNOLOGY has no effect on the direction of Micron Technology i.e., Micron Technology and AECOM TECHNOLOGY go up and down completely randomly.

Pair Corralation between Micron Technology and AECOM TECHNOLOGY

Assuming the 90 days trading horizon Micron Technology is expected to generate 2.09 times less return on investment than AECOM TECHNOLOGY. In addition to that, Micron Technology is 2.03 times more volatile than AECOM TECHNOLOGY. It trades about 0.05 of its total potential returns per unit of risk. AECOM TECHNOLOGY is currently generating about 0.19 per unit of volatility. If you would invest  9,028  in AECOM TECHNOLOGY on August 31, 2024 and sell it today you would earn a total of  1,972  from holding AECOM TECHNOLOGY or generate 21.84% return on investment over 90 days.

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

Micron Technology  vs.  AECOM TECHNOLOGY

Micron Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

AECOM TECHNOLOGY

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM TECHNOLOGY are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, AECOM TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and AECOM TECHNOLOGY

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

The idea behind Micron Technology and AECOM 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.