Correlation Between Micron Technology and Solartron Public

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

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

Diversification Opportunities for Micron Technology and Solartron Public

0.1

Correlation Coefficient

Micron Technology  Solartron Public

Average diversification

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

Pair Corralation between Micron Technology and Solartron Public

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 31.45 times less return on investment than Solartron Public. But when comparing it to its historical volatility, Micron Technology is 21.25 times less risky than Solartron Public. It trades about 0.04 of its potential returns per unit of risk. Solartron Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Solartron Public on September 17, 2024 and sell it today you would lose (21.00) from holding Solartron Public or give up 30.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.76%
Values	Daily Returns

Micron Technology  vs.  Solartron Public

Micron Technology

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 6 (%) 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.

Solartron Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solartron Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Micron Technology and Solartron Public

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

The idea behind Micron Technology and Solartron Public 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.