Correlation Between Micron Technology and Avnet

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Can any of the company-specific risk be diversified away by investing in both Micron Technology and Avnet 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 Avnet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Avnet Inc, you can compare the effects of market volatilities on Micron Technology and Avnet 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 Avnet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Avnet.

Diversification Opportunities for Micron Technology and Avnet

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Micron and Avnet is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Avnet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avnet Inc 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 Avnet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avnet Inc has no effect on the direction of Micron Technology i.e., Micron Technology and Avnet go up and down completely randomly.

Pair Corralation between Micron Technology and Avnet

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 3.08 times more return on investment than Avnet. However, Micron Technology is 3.08 times more volatile than Avnet Inc. It trades about 0.33 of its potential returns per unit of risk. Avnet Inc is currently generating about 0.3 per unit of risk. If you would invest  9,185  in Micron Technology on December 29, 2023 and sell it today you would earn a total of  2,740  from holding Micron Technology or generate 29.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Micron Technology  vs.  Avnet Inc

 Performance 
       Timeline  
Micron Technology 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.
Avnet Inc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Avnet Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Avnet is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Micron Technology and Avnet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Micron Technology and Avnet

The main advantage of trading using opposite Micron Technology and Avnet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Avnet 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 Avnet will offset losses from the drop in Avnet's long position.
The idea behind Micron Technology and Avnet Inc 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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