Correlation Between Micron Technology and GCS Holdings

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

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

Diversification Opportunities for Micron Technology and GCS Holdings

-0.06

Correlation Coefficient

Micron Technology  GCS Holdings

Good diversification

The 3 months correlation between Micron and GCS is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and GCS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCS Holdings 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 GCS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCS Holdings has no effect on the direction of Micron Technology i.e., Micron Technology and GCS Holdings go up and down completely randomly.

Pair Corralation between Micron Technology and GCS Holdings

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 0.73 times more return on investment than GCS Holdings. However, Micron Technology is 1.36 times less risky than GCS Holdings. It trades about 0.08 of its potential returns per unit of risk. GCS Holdings is currently generating about 0.0 per unit of risk. If you would invest  9,000  in Micron Technology on December 20, 2024 and sell it today you would earn a total of  1,300  from holding Micron Technology or generate 14.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.33%
Values	Daily Returns

Micron Technology  vs.  GCS Holdings

Micron Technology

Risk-Adjusted Performance

Modest

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

GCS Holdings

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Micron Technology and GCS Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.