Correlation Between Micron Technology and Siemens Energy

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

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

Diversification Opportunities for Micron Technology and Siemens Energy

-0.46

Correlation Coefficient

Micron Technology  Siemens Energy

Very good diversification

The 3 months correlation between Micron and Siemens is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Siemens Energy AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Energy AG 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 Siemens Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Energy AG has no effect on the direction of Micron Technology i.e., Micron Technology and Siemens Energy go up and down completely randomly.

Pair Corralation between Micron Technology and Siemens Energy

Assuming the 90 days trading horizon Micron Technology is expected to under-perform the Siemens Energy. In addition to that, Micron Technology is 1.08 times more volatile than Siemens Energy AG. It trades about -0.03 of its total potential returns per unit of risk. Siemens Energy AG is currently generating about 0.24 per unit of volatility. If you would invest  3,952  in Siemens Energy AG on October 9, 2024 and sell it today you would earn a total of  1,500  from holding Siemens Energy AG or generate 37.96% return on investment over 90 days.

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

Micron Technology  vs.  Siemens Energy AG

Micron Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Siemens Energy AG

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Siemens Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and Siemens Energy

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

The idea behind Micron Technology and Siemens Energy AG 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.