Correlation Between Micron Technology and C1MI34

Can any of the company-specific risk be diversified away by investing in both Micron Technology and C1MI34 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 C1MI34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Micron Technology and C1MI34, you can compare the effects of market volatilities on Micron Technology and C1MI34 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 C1MI34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and C1MI34.

Diversification Opportunities for Micron Technology and C1MI34

-0.06

Correlation Coefficient

Micron Technology  C1MI34

Good diversification

The 3 months correlation between Micron and C1MI34 is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and C1MI34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C1MI34 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 C1MI34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C1MI34 has no effect on the direction of Micron Technology i.e., Micron Technology and C1MI34 go up and down completely randomly.

Pair Corralation between Micron Technology and C1MI34

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.47 times more return on investment than C1MI34. However, Micron Technology is 1.47 times more volatile than C1MI34. It trades about 0.06 of its potential returns per unit of risk. C1MI34 is currently generating about 0.07 per unit of risk. If you would invest  4,988  in Micron Technology on September 23, 2024 and sell it today you would earn a total of  4,024  from holding Micron Technology or generate 80.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Micron Technology  vs.  C1MI34

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 comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

C1MI34

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in C1MI34 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, C1MI34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and C1MI34

The main advantage of trading using opposite Micron Technology and C1MI34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, C1MI34 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 C1MI34 will offset losses from the drop in C1MI34's long position.

The idea behind Micron Technology and C1MI34 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.