Correlation Between Micron Technology and CapitaLand Investment

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

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

Diversification Opportunities for Micron Technology and CapitaLand Investment

0.24

Correlation Coefficient

Micron Technology  CapitaLand Investment

Modest diversification

The 3 months correlation between Micron and CapitaLand is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment 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 CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of Micron Technology i.e., Micron Technology and CapitaLand Investment go up and down completely randomly.

Pair Corralation between Micron Technology and CapitaLand Investment

Assuming the 90 days trading horizon Micron Technology is expected to generate 2.26 times more return on investment than CapitaLand Investment. However, Micron Technology is 2.26 times more volatile than CapitaLand Investment Limited. It trades about 0.01 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about -0.12 per unit of risk. If you would invest  9,388  in Micron Technology on September 4, 2024 and sell it today you would lose (20.00) from holding Micron Technology or give up 0.21% of portfolio value over 90 days.

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

Micron Technology  vs.  CapitaLand Investment Limited

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 comparatively fragile basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

CapitaLand Investment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CapitaLand Investment Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CapitaLand Investment is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Micron Technology and CapitaLand Investment

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

The idea behind Micron Technology and CapitaLand Investment Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.