Correlation Between Micron Technology and Nike

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

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

Diversification Opportunities for Micron Technology and Nike

0.08

Correlation Coefficient

Micron Technology  Nike

Significant diversification

The 3 months correlation between Micron and Nike is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Micron Technology i.e., Micron Technology and Nike go up and down completely randomly.

Pair Corralation between Micron Technology and Nike

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.5 times more return on investment than Nike. However, Micron Technology is 1.5 times more volatile than Nike Inc. It trades about 0.01 of its potential returns per unit of risk. Nike Inc is currently generating about -0.03 per unit of risk. If you would invest  10,890  in Micron Technology on September 18, 2024 and sell it today you would lose (64.00) from holding Micron Technology or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.65%
Values	Daily Returns

Micron Technology  vs.  Nike Inc

Micron Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 9 (%) 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.

Nike Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Nike is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Micron Technology and Nike

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

The idea behind Micron Technology and Nike Inc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.