Correlation Between FibraHotel and Micron Technology

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

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

Diversification Opportunities for FibraHotel and Micron Technology

-0.12

Correlation Coefficient

FibraHotel  Micron Technology

Good diversification

The 3 months correlation between FibraHotel and Micron is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding FibraHotel and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and FibraHotel 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 FibraHotel 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 FibraHotel i.e., FibraHotel and Micron Technology go up and down completely randomly.

Pair Corralation between FibraHotel and Micron Technology

Assuming the 90 days trading horizon FibraHotel is expected to generate 10.77 times less return on investment than Micron Technology. But when comparing it to its historical volatility, FibraHotel is 1.56 times less risky than Micron Technology. It trades about 0.01 of its potential returns per unit of risk. Micron Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  176,182  in Micron Technology on September 3, 2024 and sell it today you would earn a total of  25,818  from holding Micron Technology or generate 14.65% return on investment over 90 days.

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

FibraHotel  vs.  Micron Technology

FibraHotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FibraHotel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, FibraHotel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Micron Technology

Risk-Adjusted Performance

6 of 100

Modest

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 fairly weak primary indicators, Micron Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FibraHotel and Micron Technology

The main advantage of trading using opposite FibraHotel and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FibraHotel 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 FibraHotel 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.