Correlation Between Micron Technology and Sea

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Can any of the company-specific risk be diversified away by investing in both Micron Technology and Sea 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 Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Sea, you can compare the effects of market volatilities on Micron Technology and Sea 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 Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Sea.

Diversification Opportunities for Micron Technology and Sea

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Micron and Sea is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Micron Technology i.e., Micron Technology and Sea go up and down completely randomly.

Pair Corralation between Micron Technology and Sea

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 2.08 times less return on investment than Sea. In addition to that, Micron Technology is 1.38 times more volatile than Sea. It trades about 0.1 of its total potential returns per unit of risk. Sea is currently generating about 0.3 per unit of volatility. If you would invest  7,718  in Sea on September 6, 2024 and sell it today you would earn a total of  4,023  from holding Sea or generate 52.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Micron Technology  vs.  Sea

 Performance 
       Timeline  
Micron Technology 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
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 inconsistent basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.
Sea 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Micron Technology and Sea Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Micron Technology and Sea

The main advantage of trading using opposite Micron Technology and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.
The idea behind Micron Technology and Sea 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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