Correlation Between Micron Technology and NiSource

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

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

Diversification Opportunities for Micron Technology and NiSource

-0.54

Correlation Coefficient

Micron Technology  NiSource

Excellent diversification

The 3 months correlation between Micron and NiSource is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource 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 NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of Micron Technology i.e., Micron Technology and NiSource go up and down completely randomly.

Pair Corralation between Micron Technology and NiSource

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the NiSource. In addition to that, Micron Technology is 3.33 times more volatile than NiSource. It trades about -0.02 of its total potential returns per unit of risk. NiSource is currently generating about 0.19 per unit of volatility. If you would invest  3,094  in NiSource on October 14, 2024 and sell it today you would earn a total of  406.00  from holding NiSource or generate 13.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Micron Technology  vs.  NiSource

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

NiSource

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, NiSource reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and NiSource

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

The idea behind Micron Technology and NiSource 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.