Correlation Between Micron Technology and Balanced Strategy

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

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

Diversification Opportunities for Micron Technology and Balanced Strategy

0.2

Correlation Coefficient

Micron Technology  Balanced Strategy

Modest diversification

The 3 months correlation between Micron and Balanced is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Strategy 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 Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of Micron Technology i.e., Micron Technology and Balanced Strategy go up and down completely randomly.

Pair Corralation between Micron Technology and Balanced Strategy

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 7.81 times more return on investment than Balanced Strategy. However, Micron Technology is 7.81 times more volatile than Balanced Strategy Fund. It trades about 0.11 of its potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.04 per unit of risk. If you would invest  8,863  in Micron Technology on September 17, 2024 and sell it today you would earn a total of  1,963  from holding Micron Technology or generate 22.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Micron Technology  vs.  Balanced Strategy Fund

Micron Technology

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Balanced Strategy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Strategy Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Balanced Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Micron Technology and Balanced Strategy

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

The idea behind Micron Technology and Balanced Strategy Fund 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.