Correlation Between Globalfoundries and Micron Technology

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

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

Diversification Opportunities for Globalfoundries and Micron Technology

0.2

Correlation Coefficient

Globalfoundries  Micron Technology

Modest diversification

The 3 months correlation between Globalfoundries and Micron is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and Globalfoundries 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 Globalfoundries 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 Globalfoundries i.e., Globalfoundries and Micron Technology go up and down completely randomly.

Pair Corralation between Globalfoundries and Micron Technology

Considering the 90-day investment horizon Globalfoundries is expected to under-perform the Micron Technology. But the stock apears to be less risky and, when comparing its historical volatility, Globalfoundries is 1.15 times less risky than Micron Technology. The stock trades about -0.03 of its potential returns per unit of risk. The Micron Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,353  in Micron Technology on December 4, 2024 and sell it today you would earn a total of  3,473  from holding Micron Technology or generate 64.88% return on investment over 90 days.

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

Globalfoundries  vs.  Micron Technology

Globalfoundries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globalfoundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Micron Technology

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Globalfoundries and Micron Technology

The main advantage of trading using opposite Globalfoundries and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globalfoundries 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 Globalfoundries 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.