Correlation Between Micron Technology and Kezar Life

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

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

Diversification Opportunities for Micron Technology and Kezar Life

0.39

Correlation Coefficient

Micron Technology  Kezar Life

Weak diversification

The 3 months correlation between Micron and Kezar is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Kezar Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kezar Life Sciences 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 Kezar Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kezar Life Sciences has no effect on the direction of Micron Technology i.e., Micron Technology and Kezar Life go up and down completely randomly.

Pair Corralation between Micron Technology and Kezar Life

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Kezar Life. In addition to that, Micron Technology is 2.75 times more volatile than Kezar Life Sciences. It trades about -0.14 of its total potential returns per unit of risk. Kezar Life Sciences is currently generating about -0.31 per unit of volatility. If you would invest  685.00  in Kezar Life Sciences on September 25, 2024 and sell it today you would lose (75.00) from holding Kezar Life Sciences or give up 10.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Micron Technology  vs.  Kezar Life Sciences

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 comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Kezar Life Sciences

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kezar Life Sciences are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kezar Life unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and Kezar Life

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

The idea behind Micron Technology and Kezar Life Sciences 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.