Correlation Between 26442CAA2 and Micron Technology

Can any of the company-specific risk be diversified away by investing in both 26442CAA2 and Micron Technology 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 26442CAA2 and Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DUKE ENERGY CAROLINAS and Micron Technology, you can compare the effects of market volatilities on 26442CAA2 and Micron Technology 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 26442CAA2 with a short position of Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of 26442CAA2 and Micron Technology.

Diversification Opportunities for 26442CAA2 and Micron Technology

0.44

Correlation Coefficient

26442CAA2  Micron Technology

Very weak diversification

The 3 months correlation between 26442CAA2 and Micron is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding DUKE ENERGY CAROLINAS and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and 26442CAA2 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 DUKE ENERGY CAROLINAS are associated (or correlated) with Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of 26442CAA2 i.e., 26442CAA2 and Micron Technology go up and down completely randomly.

Pair Corralation between 26442CAA2 and Micron Technology

Assuming the 90 days trading horizon DUKE ENERGY CAROLINAS is expected to generate 0.28 times more return on investment than Micron Technology. However, DUKE ENERGY CAROLINAS is 3.62 times less risky than Micron Technology. It trades about -0.09 of its potential returns per unit of risk. Micron Technology is currently generating about -0.03 per unit of risk. If you would invest  10,732  in DUKE ENERGY CAROLINAS on October 10, 2024 and sell it today you would lose (421.00) from holding DUKE ENERGY CAROLINAS or give up 3.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

DUKE ENERGY CAROLINAS  vs.  Micron Technology

DUKE ENERGY CAROLINAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DUKE ENERGY CAROLINAS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 26442CAA2 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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

Pair Trading with 26442CAA2 and Micron Technology

The main advantage of trading using opposite 26442CAA2 and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 26442CAA2 position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology's long position.

The idea behind DUKE ENERGY CAROLINAS and Micron Technology 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.