Correlation Between Micron Technology and Southern Copper

Can any of the company-specific risk be diversified away by investing in both Micron Technology and Southern 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 Southern 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 Southern Copper, you can compare the effects of market volatilities on Micron Technology and Southern 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 Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Southern Copper.

Diversification Opportunities for Micron Technology and Southern Copper

0.65

Correlation Coefficient

Micron Technology  Southern Copper

Poor diversification

The 3 months correlation between Micron and Southern is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Micron Technology i.e., Micron Technology and Southern Copper go up and down completely randomly.

Pair Corralation between Micron Technology and Southern Copper

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.2 times more return on investment than Southern Copper. However, Micron Technology is 1.2 times more volatile than Southern Copper. It trades about 0.05 of its potential returns per unit of risk. Southern Copper is currently generating about 0.06 per unit of risk. If you would invest  5,367  in Micron Technology on September 25, 2024 and sell it today you would earn a total of  3,605  from holding Micron Technology or generate 67.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.22%
Values	Daily Returns

Micron Technology  vs.  Southern Copper

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.

Southern Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Micron Technology and Southern Copper

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

The idea behind Micron Technology and Southern Copper 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.