Correlation Between Micron Technology and Supply Network

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

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

Diversification Opportunities for Micron Technology and Supply Network

-0.28

Correlation Coefficient

Micron Technology  Supply Network

Very good diversification

The 3 months correlation between Micron and Supply is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Supply Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supply Network 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 Supply Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supply Network has no effect on the direction of Micron Technology i.e., Micron Technology and Supply Network go up and down completely randomly.

Pair Corralation between Micron Technology and Supply Network

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the Supply Network. In addition to that, Micron Technology is 1.73 times more volatile than Supply Network. It trades about -0.07 of its total potential returns per unit of risk. Supply Network is currently generating about 0.17 per unit of volatility. If you would invest  2,130  in Supply Network on September 28, 2024 and sell it today you would earn a total of  1,110  from holding Supply Network or generate 52.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.66%
Values	Daily Returns

Micron Technology  vs.  Supply Network

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Supply Network

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Supply Network are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Supply Network may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Micron Technology and Supply Network

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

The idea behind Micron Technology and Supply Network 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.