Correlation Between Micron Technology and American CuMo

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

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

Diversification Opportunities for Micron Technology and American CuMo

-0.31

Correlation Coefficient

Micron Technology  American CuMo

Very good diversification

The 3 months correlation between Micron and American is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and American CuMo Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American CuMo Mining 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 American CuMo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American CuMo Mining has no effect on the direction of Micron Technology i.e., Micron Technology and American CuMo go up and down completely randomly.

Pair Corralation between Micron Technology and American CuMo

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 5.12 times more return on investment than American CuMo. However, Micron Technology is 5.12 times more volatile than American CuMo Mining. It trades about 0.04 of its potential returns per unit of risk. American CuMo Mining is currently generating about -0.13 per unit of risk. If you would invest  8,970  in Micron Technology on December 26, 2024 and sell it today you would earn a total of  448.00  from holding Micron Technology or generate 4.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Micron Technology  vs.  American CuMo Mining

Micron Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 3 (%) 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.

American CuMo Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days American CuMo Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, American CuMo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Micron Technology and American CuMo

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

The idea behind Micron Technology and American CuMo Mining 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.