Correlation Between Micron Technology and Aqua Power
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Aqua Power 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 Aqua Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Aqua Power Systems, you can compare the effects of market volatilities on Micron Technology and Aqua Power 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 Aqua Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Aqua Power.
Diversification Opportunities for Micron Technology and Aqua Power
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Micron and Aqua is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Aqua Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua Power Systems 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 Aqua Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua Power Systems has no effect on the direction of Micron Technology i.e., Micron Technology and Aqua Power go up and down completely randomly.
Pair Corralation between Micron Technology and Aqua Power
Allowing for the 90-day total investment horizon Micron Technology is expected to generate 3.2 times less return on investment than Aqua Power. But when comparing it to its historical volatility, Micron Technology is 3.58 times less risky than Aqua Power. It trades about 0.11 of its potential returns per unit of risk. Aqua Power Systems is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1.66 in Aqua Power Systems on September 17, 2024 and sell it today you would earn a total of 0.74 from holding Aqua Power Systems or generate 44.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Micron Technology vs. Aqua Power Systems
Performance |
Timeline |
Micron Technology |
Aqua Power Systems |
Micron Technology and Aqua Power Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Micron Technology and Aqua Power
The main advantage of trading using opposite Micron Technology and Aqua Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Aqua Power 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 Aqua Power will offset losses from the drop in Aqua Power's long position.Micron Technology vs. NVIDIA | Micron Technology vs. Intel | Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Marvell Technology Group |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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