Correlation Between Micron Technology and Loandepot

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

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

Diversification Opportunities for Micron Technology and Loandepot

0.44

Correlation Coefficient

Micron Technology  Loandepot

Very weak diversification

The 3 months correlation between Micron and Loandepot is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Loandepot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loandepot 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 Loandepot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loandepot has no effect on the direction of Micron Technology i.e., Micron Technology and Loandepot go up and down completely randomly.

Pair Corralation between Micron Technology and Loandepot

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Loandepot. But the stock apears to be less risky and, when comparing its historical volatility, Micron Technology is 1.17 times less risky than Loandepot. The stock trades about -0.08 of its potential returns per unit of risk. The Loandepot is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Loandepot on October 6, 2024 and sell it today you would lose (27.00) from holding Loandepot or give up 12.56% of portfolio value over 90 days.

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

Micron Technology  vs.  Loandepot

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.

Loandepot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loandepot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Micron Technology and Loandepot

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

The idea behind Micron Technology and Loandepot 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.