Correlation Between Micron Technology and CHINA STATE

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

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

Diversification Opportunities for Micron Technology and CHINA STATE

0.63

Correlation Coefficient

Micron Technology  CHINA STATE

Poor diversification

The 3 months correlation between Micron and CHINA is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and CHINA STATE STRU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA STATE STRU 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 CHINA STATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA STATE STRU has no effect on the direction of Micron Technology i.e., Micron Technology and CHINA STATE go up and down completely randomly.

Pair Corralation between Micron Technology and CHINA STATE

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the CHINA STATE. In addition to that, Micron Technology is 1.05 times more volatile than CHINA STATE STRU. It trades about -0.08 of its total potential returns per unit of risk. CHINA STATE STRU is currently generating about 0.1 per unit of volatility. If you would invest  92.00  in CHINA STATE STRU on September 23, 2024 and sell it today you would earn a total of  43.00  from holding CHINA STATE STRU or generate 46.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.45%
Values	Daily Returns

Micron Technology  vs.  CHINA STATE STRU

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.

CHINA STATE STRU

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA STATE STRU are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CHINA STATE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Micron Technology and CHINA STATE

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

The idea behind Micron Technology and CHINA STATE STRU 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.