Correlation Between Micron Technology and Transat AT

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

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

Diversification Opportunities for Micron Technology and Transat AT

0.05

Correlation Coefficient

Micron Technology  Transat AT

Significant diversification

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

Pair Corralation between Micron Technology and Transat AT

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Transat AT. In addition to that, Micron Technology is 1.42 times more volatile than Transat AT. It trades about -0.13 of its total potential returns per unit of risk. Transat AT is currently generating about 0.03 per unit of volatility. If you would invest  178.00  in Transat AT on September 24, 2024 and sell it today you would earn a total of  2.00  from holding Transat AT or generate 1.12% 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.  Transat AT

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.

Transat AT

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transat AT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Transat AT is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Micron Technology and Transat AT

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

The idea behind Micron Technology and Transat AT 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.