Correlation Between Micron Technology and Globaltek Fabrication

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

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

Diversification Opportunities for Micron Technology and Globaltek Fabrication

0.45

Correlation Coefficient

Micron Technology  Globaltek Fabrication

Very weak diversification

The 3 months correlation between Micron and Globaltek is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Globaltek Fabrication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globaltek Fabrication 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 Globaltek Fabrication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globaltek Fabrication has no effect on the direction of Micron Technology i.e., Micron Technology and Globaltek Fabrication go up and down completely randomly.

Pair Corralation between Micron Technology and Globaltek Fabrication

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.68 times less return on investment than Globaltek Fabrication. In addition to that, Micron Technology is 2.27 times more volatile than Globaltek Fabrication Co. It trades about 0.04 of its total potential returns per unit of risk. Globaltek Fabrication Co is currently generating about 0.14 per unit of volatility. If you would invest  6,990  in Globaltek Fabrication Co on December 5, 2024 and sell it today you would earn a total of  300.00  from holding Globaltek Fabrication Co or generate 4.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Micron Technology  vs.  Globaltek Fabrication Co

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.

Globaltek Fabrication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globaltek Fabrication Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Globaltek Fabrication 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 Globaltek Fabrication

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

The idea behind Micron Technology and Globaltek Fabrication Co 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.