Correlation Between Micron Technology and SK Hynix

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

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

Diversification Opportunities for Micron Technology and SK Hynix

0.58

Correlation Coefficient

Micron Technology  SK Hynix

Very weak diversification

The 3 months correlation between Micron and HY9H is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and SK hynix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK hynix 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 SK Hynix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK hynix has no effect on the direction of Micron Technology i.e., Micron Technology and SK Hynix go up and down completely randomly.

Pair Corralation between Micron Technology and SK Hynix

Assuming the 90 days horizon Micron Technology is expected to generate 1.83 times less return on investment than SK Hynix. But when comparing it to its historical volatility, Micron Technology is 1.22 times less risky than SK Hynix. It trades about 0.05 of its potential returns per unit of risk. SK hynix is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,300  in SK hynix on December 21, 2024 and sell it today you would earn a total of  1,800  from holding SK hynix or generate 15.93% return on investment over 90 days.

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

Micron Technology  vs.  SK hynix

Micron Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SK hynix

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SK hynix are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, SK Hynix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and SK Hynix

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

The idea behind Micron Technology and SK hynix 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.