Correlation Between Micron Technology and China Resources

Can any of the company-specific risk be diversified away by investing in both Micron Technology and China Resources 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 Resources 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 Resources Cement, you can compare the effects of market volatilities on Micron Technology and China Resources 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 Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and China Resources.

Diversification Opportunities for Micron Technology and China Resources

0.7

Correlation Coefficient

Micron Technology  China Resources

Poor diversification

The 3 months correlation between Micron and China is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and China Resources Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Cement 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 Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Cement has no effect on the direction of Micron Technology i.e., Micron Technology and China Resources go up and down completely randomly.

Pair Corralation between Micron Technology and China Resources

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.14 times more return on investment than China Resources. However, Micron Technology is 1.14 times more volatile than China Resources Cement. It trades about -0.04 of its potential returns per unit of risk. China Resources Cement is currently generating about -0.16 per unit of risk. If you would invest  10,278  in Micron Technology on October 7, 2024 and sell it today you would lose (1,291) from holding Micron Technology or give up 12.56% of portfolio value over 90 days.

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

Micron Technology  vs.  China Resources Cement

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

China Resources Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Cement has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Micron Technology and China Resources

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

The idea behind Micron Technology and China Resources Cement 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.