Correlation Between Micron Technology and MSAD Insurance

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

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

Diversification Opportunities for Micron Technology and MSAD Insurance

0.31

Correlation Coefficient

Micron Technology  MSAD Insurance

Weak diversification

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

Pair Corralation between Micron Technology and MSAD Insurance

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the MSAD Insurance. In addition to that, Micron Technology is 1.12 times more volatile than MSAD Insurance Group. It trades about -0.12 of its total potential returns per unit of risk. MSAD Insurance Group is currently generating about -0.08 per unit of volatility. If you would invest  2,374  in MSAD Insurance Group on September 12, 2024 and sell it today you would lose (97.00) from holding MSAD Insurance Group or give up 4.09% of portfolio value over 90 days.

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

Micron Technology  vs.  MSAD Insurance Group

Micron Technology

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 7 (%) 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.

MSAD Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSAD Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, MSAD Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Micron Technology and MSAD Insurance

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

The idea behind Micron Technology and MSAD Insurance Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.