Correlation Between Micron Technology and Coca Cola

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

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

Diversification Opportunities for Micron Technology and Coca Cola

0.21

Correlation Coefficient

Micron Technology  Coca Cola

Modest diversification

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

Pair Corralation between Micron Technology and Coca Cola

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Coca Cola. In addition to that, Micron Technology is 3.37 times more volatile than The Coca Cola. It trades about -0.06 of its total potential returns per unit of risk. The Coca Cola is currently generating about -0.11 per unit of volatility. If you would invest  6,387  in The Coca Cola on September 27, 2024 and sell it today you would lose (443.00) from holding The Coca Cola or give up 6.94% of portfolio value over 90 days.

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

Micron Technology  vs.  The Coca Cola

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental 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 Coca Cola

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

The idea behind Micron Technology and The Coca Cola 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.