Correlation Between Micron Technology and Nokia

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

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

Diversification Opportunities for Micron Technology and Nokia

0.34

Correlation Coefficient

Micron Technology  Nokia

Weak diversification

The 3 months correlation between Micron and Nokia is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia 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 Nokia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia has no effect on the direction of Micron Technology i.e., Micron Technology and Nokia go up and down completely randomly.

Pair Corralation between Micron Technology and Nokia

Assuming the 90 days horizon Micron Technology is expected to under-perform the Nokia. In addition to that, Micron Technology is 1.4 times more volatile than Nokia. It trades about -0.06 of its total potential returns per unit of risk. Nokia is currently generating about 0.09 per unit of volatility. If you would invest  8,458  in Nokia on September 27, 2024 and sell it today you would earn a total of  1,042  from holding Nokia or generate 12.32% return on investment over 90 days.

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

Micron Technology  vs.  Nokia

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 weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nokia

Risk-Adjusted Performance

6 of 100

OK

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

Pair Trading with Micron Technology and Nokia

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

The idea behind Micron Technology and Nokia 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.

Check out your portfolio center.

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.