Correlation Between Micron Technology and MedPacto

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

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

Diversification Opportunities for Micron Technology and MedPacto

0.06

Correlation Coefficient

Micron Technology  MedPacto

Significant diversification

The 3 months correlation between Micron and MedPacto is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and MedPacto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MedPacto 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 MedPacto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MedPacto has no effect on the direction of Micron Technology i.e., Micron Technology and MedPacto go up and down completely randomly.

Pair Corralation between Micron Technology and MedPacto

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.08 times more return on investment than MedPacto. However, Micron Technology is 1.08 times more volatile than MedPacto. It trades about -0.01 of its potential returns per unit of risk. MedPacto is currently generating about -0.15 per unit of risk. If you would invest  9,346  in Micron Technology on September 22, 2024 and sell it today you would lose (637.00) from holding Micron Technology or give up 6.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Micron Technology  vs.  MedPacto

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.

MedPacto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MedPacto has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Micron Technology and MedPacto

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

The idea behind Micron Technology and MedPacto 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.