Correlation Between Micron Technology and Federal Mogul

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

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

Diversification Opportunities for Micron Technology and Federal Mogul

-0.01

Correlation Coefficient

Micron Technology  Federal Mogul

Good diversification

The 3 months correlation between Micron and Federal is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Federal Mogul Izmit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Mogul Izmit 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 Federal Mogul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Mogul Izmit has no effect on the direction of Micron Technology i.e., Micron Technology and Federal Mogul go up and down completely randomly.

Pair Corralation between Micron Technology and Federal Mogul

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.52 times more return on investment than Federal Mogul. However, Micron Technology is 1.52 times more volatile than Federal Mogul Izmit. It trades about 0.04 of its potential returns per unit of risk. Federal Mogul Izmit is currently generating about -0.01 per unit of risk. If you would invest  8,852  in Micron Technology on December 27, 2024 and sell it today you would earn a total of  361.00  from holding Micron Technology or generate 4.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Micron Technology  vs.  Federal Mogul Izmit

Micron Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Federal Mogul Izmit

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Mogul Izmit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Federal Mogul is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Micron Technology and Federal Mogul

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

The idea behind Micron Technology and Federal Mogul Izmit 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.