Correlation Between Micron Technology and CMR SAB

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

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

Diversification Opportunities for Micron Technology and CMR SAB

-0.2

Correlation Coefficient

Micron Technology  CMR SAB

Good diversification

The 3 months correlation between Micron and CMR is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and CMR SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMR SAB de 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 CMR SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMR SAB de has no effect on the direction of Micron Technology i.e., Micron Technology and CMR SAB go up and down completely randomly.

Pair Corralation between Micron Technology and CMR SAB

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 0.92 times more return on investment than CMR SAB. However, Micron Technology is 1.08 times less risky than CMR SAB. It trades about 0.01 of its potential returns per unit of risk. CMR SAB de is currently generating about -0.01 per unit of risk. If you would invest  9,856  in Micron Technology on December 2, 2024 and sell it today you would lose (493.00) from holding Micron Technology or give up 5.0% of portfolio value over 90 days.

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

Micron Technology  vs.  CMR SAB de

Micron Technology

Risk-Adjusted Performance

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.

CMR SAB de

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CMR SAB de are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CMR SAB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and CMR SAB

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

The idea behind Micron Technology and CMR SAB de 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.