Correlation Between Micron Technology and Halliburton

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

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

Diversification Opportunities for Micron Technology and Halliburton

0.02

Correlation Coefficient

Micron Technology  Halliburton

Significant diversification

The 3 months correlation between Micron and Halliburton is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton 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 Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of Micron Technology i.e., Micron Technology and Halliburton go up and down completely randomly.

Pair Corralation between Micron Technology and Halliburton

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.32 times more return on investment than Halliburton. However, Micron Technology is 1.32 times more volatile than Halliburton. It trades about -0.02 of its potential returns per unit of risk. Halliburton is currently generating about -0.04 per unit of risk. If you would invest  11,413  in Micron Technology on September 24, 2024 and sell it today you would lose (2,401) from holding Micron Technology or give up 21.04% of portfolio value over 90 days.

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

Micron Technology  vs.  Halliburton

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 comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Halliburton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Micron Technology and Halliburton

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

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