Correlation Between Micron Technology and Geely Automobile

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

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

Diversification Opportunities for Micron Technology and Geely Automobile

0.21

Correlation Coefficient

Micron Technology  Geely Automobile

Modest diversification

The 3 months correlation between Micron and Geely is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Geely Automobile Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geely Automobile Holdings 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 Geely Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geely Automobile Holdings has no effect on the direction of Micron Technology i.e., Micron Technology and Geely Automobile go up and down completely randomly.

Pair Corralation between Micron Technology and Geely Automobile

Assuming the 90 days trading horizon Micron Technology is expected to generate 1.27 times less return on investment than Geely Automobile. In addition to that, Micron Technology is 1.02 times more volatile than Geely Automobile Holdings. It trades about 0.05 of its total potential returns per unit of risk. Geely Automobile Holdings is currently generating about 0.06 per unit of volatility. If you would invest  93.00  in Geely Automobile Holdings on September 28, 2024 and sell it today you would earn a total of  94.00  from holding Geely Automobile Holdings or generate 101.08% return on investment over 90 days.

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

Micron Technology  vs.  Geely Automobile Holdings

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 comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Geely Automobile Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and Geely Automobile

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

The idea behind Micron Technology and Geely Automobile Holdings 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.

Check out your portfolio center.

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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .