Correlation Between Micron Technology and GEM

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

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

Diversification Opportunities for Micron Technology and GEM

0.25

Correlation Coefficient

Micron Technology  GEM

Modest diversification

The 3 months correlation between Micron and GEM is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and GEM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEM Co 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 GEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEM Co has no effect on the direction of Micron Technology i.e., Micron Technology and GEM go up and down completely randomly.

Pair Corralation between Micron Technology and GEM

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.35 times more return on investment than GEM. However, Micron Technology is 1.35 times more volatile than GEM Co. It trades about 0.05 of its potential returns per unit of risk. GEM Co is currently generating about 0.0 per unit of risk. If you would invest  5,581  in Micron Technology on September 28, 2024 and sell it today you would earn a total of  3,401  from holding Micron Technology or generate 60.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.57%
Values	Daily Returns

Micron Technology  vs.  GEM Co

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 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.

GEM Co

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Micron Technology and GEM

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

The idea behind Micron Technology and GEM Co 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.