Correlation Between Micron Technology and KeyCorp

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

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

Diversification Opportunities for Micron Technology and KeyCorp

-0.35

Correlation Coefficient

Micron Technology  KeyCorp

Very good diversification

The 3 months correlation between Micron and KeyCorp is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Micron Technology i.e., Micron Technology and KeyCorp go up and down completely randomly.

Pair Corralation between Micron Technology and KeyCorp

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the KeyCorp. But the stock apears to be less risky and, when comparing its historical volatility, Micron Technology is 1.01 times less risky than KeyCorp. The stock trades about -0.08 of its potential returns per unit of risk. The KeyCorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,486  in KeyCorp on September 26, 2024 and sell it today you would earn a total of  1,184  from holding KeyCorp or generate 12.48% return on investment over 90 days.

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

Micron Technology  vs.  KeyCorp

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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

KeyCorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, KeyCorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and KeyCorp

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

The idea behind Micron Technology and KeyCorp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.