Correlation Between Micron Technology and CAFCA

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

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

Diversification Opportunities for Micron Technology and CAFCA

-0.5

Correlation Coefficient

Micron Technology  CAFCA

Very good diversification

The 3 months correlation between Micron and CAFCA is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and CAFCA LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAFCA LIMITED 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 CAFCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAFCA LIMITED has no effect on the direction of Micron Technology i.e., Micron Technology and CAFCA go up and down completely randomly.

Pair Corralation between Micron Technology and CAFCA

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the CAFCA. In addition to that, Micron Technology is 1.14 times more volatile than CAFCA LIMITED. It trades about -0.06 of its total potential returns per unit of risk. CAFCA LIMITED is currently generating about 0.22 per unit of volatility. If you would invest  140,000  in CAFCA LIMITED on September 28, 2024 and sell it today you would earn a total of  65,000  from holding CAFCA LIMITED or generate 46.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Micron Technology  vs.  CAFCA LIMITED

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.

CAFCA LIMITED

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CAFCA LIMITED are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, CAFCA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and CAFCA

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

The idea behind Micron Technology and CAFCA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .