Correlation Between Micron Technology and United Parcel

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

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

Diversification Opportunities for Micron Technology and United Parcel

0.62

Correlation Coefficient

Micron Technology  United Parcel

Poor diversification

The 3 months correlation between Micron and United is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Micron Technology i.e., Micron Technology and United Parcel go up and down completely randomly.

Pair Corralation between Micron Technology and United Parcel

Assuming the 90 days horizon Micron Technology is expected to under-perform the United Parcel. In addition to that, Micron Technology is 2.36 times more volatile than United Parcel Service. It trades about -0.01 of its total potential returns per unit of risk. United Parcel Service is currently generating about 0.16 per unit of volatility. If you would invest  263,507  in United Parcel Service on September 4, 2024 and sell it today you would earn a total of  10,093  from holding United Parcel Service or generate 3.83% return on investment over 90 days.

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

Micron Technology  vs.  United Parcel Service

Micron Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Micron Technology showed solid returns over the last few months and may actually be approaching a breakup point.

United Parcel Service

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Parcel Service are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, United Parcel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Micron Technology and United Parcel

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

The idea behind Micron Technology and United Parcel Service 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.