Correlation Between Micron Technology and Sanxiang Advanced

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

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

Diversification Opportunities for Micron Technology and Sanxiang Advanced

0.22

Correlation Coefficient

Micron Technology  Sanxiang Advanced

Modest diversification

The 3 months correlation between Micron and Sanxiang is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Sanxiang Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanxiang Advanced 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 Sanxiang Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanxiang Advanced has no effect on the direction of Micron Technology i.e., Micron Technology and Sanxiang Advanced go up and down completely randomly.

Pair Corralation between Micron Technology and Sanxiang Advanced

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Sanxiang Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Micron Technology is 1.07 times less risky than Sanxiang Advanced. The stock trades about -0.02 of its potential returns per unit of risk. The Sanxiang Advanced Materials is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,873  in Sanxiang Advanced Materials on September 24, 2024 and sell it today you would lose (231.00) from holding Sanxiang Advanced Materials or give up 12.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.39%
Values	Daily Returns

Micron Technology  vs.  Sanxiang Advanced Materials

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.

Sanxiang Advanced

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sanxiang Advanced Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sanxiang Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and Sanxiang Advanced

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

The idea behind Micron Technology and Sanxiang Advanced Materials 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.