Correlation Between Micron Technology and Wartsila Oyj

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

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

Diversification Opportunities for Micron Technology and Wartsila Oyj

0.12

Correlation Coefficient

Micron Technology  Wartsila Oyj

Average diversification

The 3 months correlation between Micron and Wartsila is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Wartsila Oyj Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wartsila Oyj Abp 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 Wartsila Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wartsila Oyj Abp has no effect on the direction of Micron Technology i.e., Micron Technology and Wartsila Oyj go up and down completely randomly.

Pair Corralation between Micron Technology and Wartsila Oyj

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.09 times less return on investment than Wartsila Oyj. But when comparing it to its historical volatility, Micron Technology is 1.18 times less risky than Wartsila Oyj. It trades about 0.06 of its potential returns per unit of risk. Wartsila Oyj Abp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  236.00  in Wartsila Oyj Abp on September 12, 2024 and sell it today you would earn a total of  117.00  from holding Wartsila Oyj Abp or generate 49.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.23%
Values	Daily Returns

Micron Technology  vs.  Wartsila Oyj Abp

Micron Technology

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Wartsila Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wartsila Oyj Abp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly 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 Wartsila Oyj

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

The idea behind Micron Technology and Wartsila Oyj Abp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.