Correlation Between Micron Technology and SGA Solutions

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

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

Diversification Opportunities for Micron Technology and SGA Solutions

0.36

Correlation Coefficient

Micron Technology  SGA Solutions

Weak diversification

The 3 months correlation between Micron and SGA is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and SGA Solutions CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGA Solutions CoLtd 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 SGA Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGA Solutions CoLtd has no effect on the direction of Micron Technology i.e., Micron Technology and SGA Solutions go up and down completely randomly.

Pair Corralation between Micron Technology and SGA Solutions

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.07 times more return on investment than SGA Solutions. However, Micron Technology is 1.07 times more volatile than SGA Solutions CoLtd. It trades about 0.05 of its potential returns per unit of risk. SGA Solutions CoLtd is currently generating about -0.03 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  3,266  from holding Micron Technology or generate 58.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.38%
Values	Daily Returns

Micron Technology  vs.  SGA Solutions CoLtd

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.

SGA Solutions CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGA Solutions CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SGA Solutions 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 SGA Solutions

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

The idea behind Micron Technology and SGA Solutions CoLtd 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.