Correlation Between Micron Technology and Wells Fargo

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

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

Diversification Opportunities for Micron Technology and Wells Fargo

0.13

Correlation Coefficient

Micron Technology  Wells Fargo

Average diversification

The 3 months correlation between Micron and Wells is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Wells Fargo Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Diversified 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Diversified has no effect on the direction of Micron Technology i.e., Micron Technology and Wells Fargo go up and down completely randomly.

Pair Corralation between Micron Technology and Wells Fargo

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 7.42 times more return on investment than Wells Fargo. However, Micron Technology is 7.42 times more volatile than Wells Fargo Diversified. It trades about 0.05 of its potential returns per unit of risk. Wells Fargo Diversified is currently generating about 0.13 per unit of risk. If you would invest  5,417  in Micron Technology on September 26, 2024 and sell it today you would earn a total of  3,555  from holding Micron Technology or generate 65.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Micron Technology  vs.  Wells Fargo Diversified

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Wells Fargo Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Diversified has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wells Fargo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Micron Technology and Wells Fargo

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

The idea behind Micron Technology and Wells Fargo Diversified 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.