Correlation Between Constellium and Micron Technology

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

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

Diversification Opportunities for Constellium and Micron Technology

0.45

Correlation Coefficient

Constellium  Micron Technology

Very weak diversification

The 3 months correlation between Constellium and Micron is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and Constellium 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 Constellium Nv are associated (or correlated) with Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Constellium i.e., Constellium and Micron Technology go up and down completely randomly.

Pair Corralation between Constellium and Micron Technology

Given the investment horizon of 90 days Constellium Nv is expected to under-perform the Micron Technology. But the stock apears to be less risky and, when comparing its historical volatility, Constellium Nv is 2.39 times less risky than Micron Technology. The stock trades about -0.36 of its potential returns per unit of risk. The Micron Technology is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  9,971  in Micron Technology on October 4, 2024 and sell it today you would lose (1,555) from holding Micron Technology or give up 15.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Constellium Nv  vs.  Micron Technology

Constellium Nv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellium Nv 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 basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Constellium and Micron Technology

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

The idea behind Constellium Nv and Micron Technology 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.