Correlation Between Micron Technology and Fushun Special

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

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

Diversification Opportunities for Micron Technology and Fushun Special

0.67

Correlation Coefficient

Micron Technology  Fushun Special

Poor diversification

The 3 months correlation between Micron and Fushun is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Fushun Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fushun Special Steel 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 Fushun Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fushun Special Steel has no effect on the direction of Micron Technology i.e., Micron Technology and Fushun Special go up and down completely randomly.

Pair Corralation between Micron Technology and Fushun Special

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 3.17 times less return on investment than Fushun Special. But when comparing it to its historical volatility, Micron Technology is 1.19 times less risky than Fushun Special. It trades about 0.05 of its potential returns per unit of risk. Fushun Special Steel is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  509.00  in Fushun Special Steel on September 13, 2024 and sell it today you would earn a total of  151.00  from holding Fushun Special Steel or generate 29.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.06%
Values	Daily Returns

Micron Technology  vs.  Fushun Special Steel

Micron Technology

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fushun Special Steel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fushun Special Steel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fushun Special sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and Fushun Special

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

The idea behind Micron Technology and Fushun Special Steel 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.