Correlation Between Micron Technology and Tsinghuatongfang

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

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

Diversification Opportunities for Micron Technology and Tsinghuatongfang

0.25

Correlation Coefficient

Micron Technology  Tsinghuatongfang

Modest diversification

The 3 months correlation between Micron and Tsinghuatongfang is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Tsinghuatongfang Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsinghuatongfang 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 Tsinghuatongfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsinghuatongfang has no effect on the direction of Micron Technology i.e., Micron Technology and Tsinghuatongfang go up and down completely randomly.

Pair Corralation between Micron Technology and Tsinghuatongfang

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.06 times less return on investment than Tsinghuatongfang. But when comparing it to its historical volatility, Micron Technology is 1.13 times less risky than Tsinghuatongfang. It trades about 0.06 of its potential returns per unit of risk. Tsinghuatongfang Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  442.00  in Tsinghuatongfang Co on September 24, 2024 and sell it today you would earn a total of  322.00  from holding Tsinghuatongfang Co or generate 72.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.98%
Values	Daily Returns

Micron Technology  vs.  Tsinghuatongfang Co

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.

Tsinghuatongfang

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsinghuatongfang Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tsinghuatongfang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and Tsinghuatongfang

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

The idea behind Micron Technology and Tsinghuatongfang 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.