Correlation Between Micron Technology and Taiwan Taomee

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

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

Diversification Opportunities for Micron Technology and Taiwan Taomee

-0.4

Correlation Coefficient

Micron Technology  Taiwan Taomee

Very good diversification

The 3 months correlation between Micron and Taiwan is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Taiwan Taomee Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Taomee 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 Taiwan Taomee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Taomee has no effect on the direction of Micron Technology i.e., Micron Technology and Taiwan Taomee go up and down completely randomly.

Pair Corralation between Micron Technology and Taiwan Taomee

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.17 times more return on investment than Taiwan Taomee. However, Micron Technology is 1.17 times more volatile than Taiwan Taomee Co. It trades about 0.04 of its potential returns per unit of risk. Taiwan Taomee Co is currently generating about 0.02 per unit of risk. If you would invest  8,425  in Micron Technology on October 10, 2024 and sell it today you would earn a total of  1,516  from holding Micron Technology or generate 17.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.98%
Values	Daily Returns

Micron Technology  vs.  Taiwan Taomee 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Taiwan Taomee

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Taomee Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taiwan Taomee 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 Taiwan Taomee

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

The idea behind Micron Technology and Taiwan Taomee 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.