Correlation Between Micron Technology and T M

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

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

Diversification Opportunities for Micron Technology and T M

0.23

Correlation Coefficient

Micron Technology  T M

Modest diversification

The 3 months correlation between Micron and TMMI is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and T M M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T M M 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 T M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T M M has no effect on the direction of Micron Technology i.e., Micron Technology and T M go up and down completely randomly.

Pair Corralation between Micron Technology and T M

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the T M. But the stock apears to be less risky and, when comparing its historical volatility, Micron Technology is 5.53 times less risky than T M. The stock trades about -0.08 of its potential returns per unit of risk. The T M M is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.48  in T M M on September 29, 2024 and sell it today you would lose (0.11) from holding T M M or give up 22.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Micron Technology  vs.  T M M

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.

T M M

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T M M are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal primary indicators, T M demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and T M

The main advantage of trading using opposite Micron Technology and T M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, T M 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 T M will offset losses from the drop in T M's long position.

The idea behind Micron Technology and T M M 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.