Correlation Between Micron Technology and China Great

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

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

Diversification Opportunities for Micron Technology and China Great

0.21

Correlation Coefficient

Micron Technology  China Great

Modest diversification

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

Pair Corralation between Micron Technology and China Great

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the China Great. In addition to that, Micron Technology is 3.44 times more volatile than China Great Wall. It trades about -0.13 of its total potential returns per unit of risk. China Great Wall is currently generating about 0.13 per unit of volatility. If you would invest  821.00  in China Great Wall on September 26, 2024 and sell it today you would earn a total of  31.00  from holding China Great Wall or generate 3.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Micron Technology  vs.  China Great Wall

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

China Great Wall

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Great Wall are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Great sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and China Great

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

The idea behind Micron Technology and China Great Wall 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..