Correlation Between Micron Technology and Dong A
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Dong A 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 Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Dong A Eltek, you can compare the effects of market volatilities on Micron Technology and Dong A 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 Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Dong A.
Diversification Opportunities for Micron Technology and Dong A
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Micron and Dong is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Dong A Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Eltek 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 Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Eltek has no effect on the direction of Micron Technology i.e., Micron Technology and Dong A go up and down completely randomly.
Pair Corralation between Micron Technology and Dong A
Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Dong A. But the stock apears to be less risky and, when comparing its historical volatility, Micron Technology is 1.29 times less risky than Dong A. The stock trades about -0.04 of its potential returns per unit of risk. The Dong A Eltek is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 462,000 in Dong A Eltek on September 19, 2024 and sell it today you would lose (58,500) from holding Dong A Eltek or give up 12.66% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 96.03% |
Values | Daily Returns |
Micron Technology vs. Dong A Eltek
Performance |
Timeline |
Micron Technology |
Dong A Eltek |
Micron Technology and Dong A Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Micron Technology and Dong A
The main advantage of trading using opposite Micron Technology and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Dong A 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 Dong A will offset losses from the drop in Dong A's long position.The idea behind Micron Technology and Dong A Eltek 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.Dong A vs. Cube Entertainment | Dong A vs. Dreamus Company | Dong A vs. LG Energy Solution | Dong A vs. Dongwon System |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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