Correlation Between Micron Technology and Beach Energy

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

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

Diversification Opportunities for Micron Technology and Beach Energy

-0.07

Correlation Coefficient

Micron Technology  Beach Energy

Good diversification

The 3 months correlation between Micron and Beach is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Beach Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beach Energy 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 Beach Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beach Energy has no effect on the direction of Micron Technology i.e., Micron Technology and Beach Energy go up and down completely randomly.

Pair Corralation between Micron Technology and Beach Energy

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Beach Energy. But the stock apears to be less risky and, when comparing its historical volatility, Micron Technology is 1.44 times less risky than Beach Energy. The stock trades about -0.07 of its potential returns per unit of risk. The Beach Energy is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,140  in Beach Energy on September 30, 2024 and sell it today you would lose (545.00) from holding Beach Energy or give up 25.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Micron Technology  vs.  Beach Energy

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Beach Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beach Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Beach Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Micron Technology and Beach Energy

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

The idea behind Micron Technology and Beach Energy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.