Correlation Between Micron Technology and Hua Eng

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

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

Diversification Opportunities for Micron Technology and Hua Eng

0.18

Correlation Coefficient

Micron Technology  Hua Eng

Average diversification

The 3 months correlation between Micron and Hua is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Hua Eng Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Eng Wire 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 Hua Eng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Eng Wire has no effect on the direction of Micron Technology i.e., Micron Technology and Hua Eng go up and down completely randomly.

Pair Corralation between Micron Technology and Hua Eng

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Hua Eng. In addition to that, Micron Technology is 1.84 times more volatile than Hua Eng Wire. It trades about -0.02 of its total potential returns per unit of risk. Hua Eng Wire is currently generating about 0.01 per unit of volatility. If you would invest  2,805  in Hua Eng Wire on December 5, 2024 and sell it today you would lose (15.00) from holding Hua Eng Wire or give up 0.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.22%
Values	Daily Returns

Micron Technology  vs.  Hua Eng Wire

Micron Technology

Risk-Adjusted Performance

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.

Hua Eng Wire

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hua Eng Wire has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hua Eng is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Micron Technology and Hua Eng

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

The idea behind Micron Technology and Hua Eng Wire 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.