Correlation Between Micron Technology and Nortech Systems

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

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

Diversification Opportunities for Micron Technology and Nortech Systems

0.1

Correlation Coefficient

Micron Technology  Nortech Systems

Average diversification

The 3 months correlation between Micron and Nortech is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Nortech Systems Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nortech Systems 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 Nortech Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nortech Systems has no effect on the direction of Micron Technology i.e., Micron Technology and Nortech Systems go up and down completely randomly.

Pair Corralation between Micron Technology and Nortech Systems

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.22 times less return on investment than Nortech Systems. But when comparing it to its historical volatility, Micron Technology is 1.31 times less risky than Nortech Systems. It trades about 0.04 of its potential returns per unit of risk. Nortech Systems Incorporated is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  944.00  in Nortech Systems Incorporated on September 13, 2024 and sell it today you would earn a total of  234.00  from holding Nortech Systems Incorporated or generate 24.79% return on investment over 90 days.

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

Micron Technology  vs.  Nortech Systems Incorporated

Micron Technology

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Nortech Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nortech Systems Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nortech Systems is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Micron Technology and Nortech Systems

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

The idea behind Micron Technology and Nortech Systems Incorporated 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.