Correlation Between Micron Technology and Financials Ultrasector

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

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

Diversification Opportunities for Micron Technology and Financials Ultrasector

-0.15

Correlation Coefficient

Micron Technology  Financials Ultrasector

Good diversification

The 3 months correlation between Micron and Financials is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector 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 Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of Micron Technology i.e., Micron Technology and Financials Ultrasector go up and down completely randomly.

Pair Corralation between Micron Technology and Financials Ultrasector

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 2.22 times more return on investment than Financials Ultrasector. However, Micron Technology is 2.22 times more volatile than Financials Ultrasector Profund. It trades about 0.05 of its potential returns per unit of risk. Financials Ultrasector Profund is currently generating about 0.1 per unit of risk. If you would invest  6,211  in Micron Technology on September 30, 2024 and sell it today you would earn a total of  2,652  from holding Micron Technology or generate 42.7% return on investment over 90 days.

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

Micron Technology  vs.  Financials Ultrasector Profund

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.

Financials Ultrasector

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Financials Ultrasector Profund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Financials Ultrasector may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Micron Technology and Financials Ultrasector

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

The idea behind Micron Technology and Financials Ultrasector Profund 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.