Correlation Between Micron Technology and E3 LITHIUM

Can any of the company-specific risk be diversified away by investing in both Micron Technology and E3 LITHIUM 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 E3 LITHIUM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Micron Technology and E3 LITHIUM LTD, you can compare the effects of market volatilities on Micron Technology and E3 LITHIUM 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 E3 LITHIUM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and E3 LITHIUM.

Diversification Opportunities for Micron Technology and E3 LITHIUM

0.29

Correlation Coefficient

Micron Technology  E3 LITHIUM

Modest diversification

The 3 months correlation between Micron and OW3 is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and E3 LITHIUM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E3 LITHIUM LTD 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 E3 LITHIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E3 LITHIUM LTD has no effect on the direction of Micron Technology i.e., Micron Technology and E3 LITHIUM go up and down completely randomly.

Pair Corralation between Micron Technology and E3 LITHIUM

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 0.73 times more return on investment than E3 LITHIUM. However, Micron Technology is 1.37 times less risky than E3 LITHIUM. It trades about 0.01 of its potential returns per unit of risk. E3 LITHIUM LTD is currently generating about -0.03 per unit of risk. If you would invest  9,411  in Micron Technology on December 5, 2024 and sell it today you would lose (291.00) from holding Micron Technology or give up 3.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.4%
Values	Daily Returns

Micron Technology  vs.  E3 LITHIUM LTD

Micron Technology

Risk-Adjusted Performance

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.

E3 LITHIUM LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days E3 LITHIUM LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Micron Technology and E3 LITHIUM

The main advantage of trading using opposite Micron Technology and E3 LITHIUM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, E3 LITHIUM 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 E3 LITHIUM will offset losses from the drop in E3 LITHIUM's long position.

The idea behind Micron Technology and E3 LITHIUM LTD 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.