Correlation Between Micron Technology and Bright Dairy

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

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

Diversification Opportunities for Micron Technology and Bright Dairy

-0.01

Correlation Coefficient

Micron Technology  Bright Dairy

Good diversification

The 3 months correlation between Micron and Bright is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Bright Dairy Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Dairy Food 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 Bright Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Dairy Food has no effect on the direction of Micron Technology i.e., Micron Technology and Bright Dairy go up and down completely randomly.

Pair Corralation between Micron Technology and Bright Dairy

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Bright Dairy. In addition to that, Micron Technology is 1.91 times more volatile than Bright Dairy Food. It trades about -0.06 of its total potential returns per unit of risk. Bright Dairy Food is currently generating about 0.04 per unit of volatility. If you would invest  766.00  in Bright Dairy Food on October 7, 2024 and sell it today you would earn a total of  63.00  from holding Bright Dairy Food or generate 8.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Micron Technology  vs.  Bright Dairy Food

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bright Dairy Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Dairy Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Micron Technology and Bright Dairy

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

The idea behind Micron Technology and Bright Dairy Food 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.