Correlation Between Micron Technology and Highland Copper

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

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

Diversification Opportunities for Micron Technology and Highland Copper

-0.33

Correlation Coefficient

Micron Technology  Highland Copper

Very good diversification

The 3 months correlation between Micron and Highland is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Highland Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Copper 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 Highland Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Copper has no effect on the direction of Micron Technology i.e., Micron Technology and Highland Copper go up and down completely randomly.

Pair Corralation between Micron Technology and Highland Copper

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 0.68 times more return on investment than Highland Copper. However, Micron Technology is 1.48 times less risky than Highland Copper. It trades about 0.19 of its potential returns per unit of risk. Highland Copper is currently generating about -0.09 per unit of risk. If you would invest  9,773  in Micron Technology on September 20, 2024 and sell it today you would earn a total of  1,087  from holding Micron Technology or generate 11.12% 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.  Highland Copper

Micron Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Highland Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Micron Technology and Highland Copper

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

The idea behind Micron Technology and Highland Copper 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.