Correlation Between Micron Technology and Wolfden Resources

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

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

Diversification Opportunities for Micron Technology and Wolfden Resources

0.25

Correlation Coefficient

Micron Technology  Wolfden Resources

Modest diversification

The 3 months correlation between Micron and Wolfden is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Wolfden Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolfden Resources 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 Wolfden Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolfden Resources has no effect on the direction of Micron Technology i.e., Micron Technology and Wolfden Resources go up and down completely randomly.

Pair Corralation between Micron Technology and Wolfden Resources

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 25.06 times less return on investment than Wolfden Resources. But when comparing it to its historical volatility, Micron Technology is 19.75 times less risky than Wolfden Resources. It trades about 0.06 of its potential returns per unit of risk. Wolfden Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Wolfden Resources on September 22, 2024 and sell it today you would lose (11.00) from holding Wolfden Resources or give up 73.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Micron Technology  vs.  Wolfden Resources

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.

Wolfden Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wolfden Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Wolfden Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and Wolfden Resources

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

The idea behind Micron Technology and Wolfden Resources 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.