Correlation Between Micron Technology and Aker Solutions

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

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

Diversification Opportunities for Micron Technology and Aker Solutions

-0.21

Correlation Coefficient

Micron Technology  Aker Solutions

Very good diversification

The 3 months correlation between Micron and Aker is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Aker Solutions ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Solutions ASA 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 Aker Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Solutions ASA has no effect on the direction of Micron Technology i.e., Micron Technology and Aker Solutions go up and down completely randomly.

Pair Corralation between Micron Technology and Aker Solutions

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Aker Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Micron Technology is 4.25 times less risky than Aker Solutions. The stock trades about -0.11 of its potential returns per unit of risk. The Aker Solutions ASA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  539.00  in Aker Solutions ASA on September 23, 2024 and sell it today you would earn a total of  461.00  from holding Aker Solutions ASA or generate 85.53% 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.  Aker Solutions ASA

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.

Aker Solutions ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Solutions ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Aker Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and Aker Solutions

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

The idea behind Micron Technology and Aker Solutions ASA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.