Correlation Between Micron Technology and Ero Copper

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

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

Diversification Opportunities for Micron Technology and Ero Copper

-0.07

Correlation Coefficient

Micron Technology  Ero Copper

Good diversification

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

Pair Corralation between Micron Technology and Ero Copper

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 0.99 times more return on investment than Ero Copper. However, Micron Technology is 1.01 times less risky than Ero Copper. It trades about -0.07 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.29 per unit of risk. If you would invest  10,834  in Micron Technology on September 13, 2024 and sell it today you would lose (1,010) from holding Micron Technology or give up 9.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Micron Technology  vs.  Ero Copper Corp

Micron Technology

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ero Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ero Copper Corp 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 Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Micron Technology and Ero Copper

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

The idea behind Micron Technology and Ero Copper Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.