Correlation Between Micron Technology and Big Yellow

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

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

Diversification Opportunities for Micron Technology and Big Yellow

0.05

Correlation Coefficient

Micron Technology  Big Yellow

Significant diversification

The 3 months correlation between Micron and Big is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Big Yellow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Yellow Group 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 Big Yellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Yellow Group has no effect on the direction of Micron Technology i.e., Micron Technology and Big Yellow go up and down completely randomly.

Pair Corralation between Micron Technology and Big Yellow

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 2.53 times more return on investment than Big Yellow. However, Micron Technology is 2.53 times more volatile than Big Yellow Group. It trades about 0.04 of its potential returns per unit of risk. Big Yellow Group is currently generating about -0.04 per unit of risk. If you would invest  7,579  in Micron Technology on September 23, 2024 and sell it today you would earn a total of  1,433  from holding Micron Technology or generate 18.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.54%
Values	Daily Returns

Micron Technology  vs.  Big Yellow Group

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Big Yellow Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Yellow Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Micron Technology and Big Yellow

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

The idea behind Micron Technology and Big Yellow Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.