Correlation Between Micron Technology and KGHM Polska

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

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

Diversification Opportunities for Micron Technology and KGHM Polska

0.41

Correlation Coefficient

Micron Technology  KGHM Polska

Very weak diversification

The 3 months correlation between Micron and KGHM is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and KGHM Polska Miedz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KGHM Polska Miedz 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 KGHM Polska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KGHM Polska Miedz has no effect on the direction of Micron Technology i.e., Micron Technology and KGHM Polska go up and down completely randomly.

Pair Corralation between Micron Technology and KGHM Polska

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the KGHM Polska. In addition to that, Micron Technology is 1.41 times more volatile than KGHM Polska Miedz. It trades about -0.07 of its total potential returns per unit of risk. KGHM Polska Miedz is currently generating about -0.05 per unit of volatility. If you would invest  3,431  in KGHM Polska Miedz on September 25, 2024 and sell it today you would lose (645.00) from holding KGHM Polska Miedz or give up 18.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.66%
Values	Daily Returns

Micron Technology  vs.  KGHM Polska Miedz

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.

KGHM Polska Miedz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KGHM Polska Miedz has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Micron Technology and KGHM Polska

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

The idea behind Micron Technology and KGHM Polska Miedz 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 .