Correlation Between Micron Technology and Liaoning Dingjide

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

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

Diversification Opportunities for Micron Technology and Liaoning Dingjide

-0.24

Correlation Coefficient

Micron Technology  Liaoning Dingjide

Very good diversification

The 3 months correlation between Micron and Liaoning is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Liaoning Dingjide Petrochemica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Dingjide 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 Liaoning Dingjide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Dingjide has no effect on the direction of Micron Technology i.e., Micron Technology and Liaoning Dingjide go up and down completely randomly.

Pair Corralation between Micron Technology and Liaoning Dingjide

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Liaoning Dingjide. In addition to that, Micron Technology is 1.81 times more volatile than Liaoning Dingjide Petrochemical. It trades about -0.14 of its total potential returns per unit of risk. Liaoning Dingjide Petrochemical is currently generating about 0.1 per unit of volatility. If you would invest  3,063  in Liaoning Dingjide Petrochemical on September 25, 2024 and sell it today you would earn a total of  149.00  from holding Liaoning Dingjide Petrochemical or generate 4.86% return on investment over 90 days.

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

Micron Technology  vs.  Liaoning Dingjide Petrochemica

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Liaoning Dingjide

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liaoning Dingjide Petrochemical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liaoning Dingjide sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and Liaoning Dingjide

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

The idea behind Micron Technology and Liaoning Dingjide Petrochemical 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.