Correlation Between Micron Technology and ApplyDirect

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

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

Diversification Opportunities for Micron Technology and ApplyDirect

0.21

Correlation Coefficient

Micron Technology  ApplyDirect

Modest diversification

The 3 months correlation between Micron and ApplyDirect is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and ApplyDirect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ApplyDirect 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 ApplyDirect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ApplyDirect has no effect on the direction of Micron Technology i.e., Micron Technology and ApplyDirect go up and down completely randomly.

Pair Corralation between Micron Technology and ApplyDirect

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the ApplyDirect. But the stock apears to be less risky and, when comparing its historical volatility, Micron Technology is 2.1 times less risky than ApplyDirect. The stock trades about -0.04 of its potential returns per unit of risk. The ApplyDirect is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.00  in ApplyDirect on October 7, 2024 and sell it today you would earn a total of  0.10  from holding ApplyDirect or generate 2.0% return on investment over 90 days.

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

Micron Technology  vs.  ApplyDirect

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.

ApplyDirect

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ApplyDirect are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ApplyDirect unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and ApplyDirect

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

The idea behind Micron Technology and ApplyDirect 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.