Correlation Between Micron Technology and Selective Insurance

Can any of the company-specific risk be diversified away by investing in both Micron Technology and Selective 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 Selective 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 Selective Insurance Group, you can compare the effects of market volatilities on Micron Technology and Selective 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 Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Selective Insurance.

Diversification Opportunities for Micron Technology and Selective Insurance

0.15

Correlation Coefficient

Micron Technology  Selective Insurance

Average diversification

The 3 months correlation between Micron and Selective is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Micron Technology i.e., Micron Technology and Selective Insurance go up and down completely randomly.

Pair Corralation between Micron Technology and Selective Insurance

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.72 times more return on investment than Selective Insurance. However, Micron Technology is 1.72 times more volatile than Selective Insurance Group. It trades about 0.05 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.01 per unit of risk. If you would invest  5,781  in Micron Technology on October 11, 2024 and sell it today you would earn a total of  4,160  from holding Micron Technology or generate 71.96% return on investment over 90 days.

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

Micron Technology  vs.  Selective Insurance Group

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.

Selective Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Selective Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Selective Insurance is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Micron Technology and Selective Insurance

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

The idea behind Micron Technology and Selective 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 Global Correlations module to find global opportunities by holding instruments from different markets.