Correlation Between Micron Technology and PFIZER

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

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

Diversification Opportunities for Micron Technology and PFIZER

0.32

Correlation Coefficient

Micron Technology  PFIZER

Weak diversification

The 3 months correlation between Micron and PFIZER is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and PFIZER INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFIZER 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 PFIZER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PFIZER INC has no effect on the direction of Micron Technology i.e., Micron Technology and PFIZER go up and down completely randomly.

Pair Corralation between Micron Technology and PFIZER

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 6.14 times more return on investment than PFIZER. However, Micron Technology is 6.14 times more volatile than PFIZER INC. It trades about 0.05 of its potential returns per unit of risk. PFIZER INC is currently generating about 0.01 per unit of risk. If you would invest  6,113  in Micron Technology on October 12, 2024 and sell it today you would earn a total of  3,821  from holding Micron Technology or generate 62.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Micron Technology  vs.  PFIZER INC

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.

PFIZER INC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PFIZER INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, PFIZER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Micron Technology and PFIZER

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

The idea behind Micron Technology and PFIZER 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.