Correlation Between Micron Technology and Petro Rio

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Can any of the company-specific risk be diversified away by investing in both Micron Technology and Petro Rio 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 Petro Rio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Petro Rio SA, you can compare the effects of market volatilities on Micron Technology and Petro Rio 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 Petro Rio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Petro Rio.

Diversification Opportunities for Micron Technology and Petro Rio

MicronPetroDiversified AwayMicronPetroDiversified Away100%
0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Micron and Petro is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Petro Rio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Rio SA 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 Petro Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Rio SA has no effect on the direction of Micron Technology i.e., Micron Technology and Petro Rio go up and down completely randomly.

Pair Corralation between Micron Technology and Petro Rio

Assuming the 90 days trading horizon Micron Technology is expected to generate 2.71 times more return on investment than Petro Rio. However, Micron Technology is 2.71 times more volatile than Petro Rio SA. It trades about 0.03 of its potential returns per unit of risk. Petro Rio SA is currently generating about 0.0 per unit of risk. If you would invest  9,911  in Micron Technology on November 21, 2024 and sell it today you would earn a total of  260.00  from holding Micron Technology or generate 2.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Micron Technology  vs.  Petro Rio SA

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50510
JavaScript chart by amCharts 3.21.15MUTC34 PRIO3
       Timeline  
Micron Technology 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb859095100105110115
Petro Rio SA 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Petro Rio SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Petro Rio is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3940414243

Micron Technology and Petro Rio Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-14.17-10.61-7.05-3.50.05933.527.110.6814.26 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15MUTC34 PRIO3
       Returns  

Pair Trading with Micron Technology and Petro Rio

The main advantage of trading using opposite Micron Technology and Petro Rio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Petro Rio 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 Petro Rio will offset losses from the drop in Petro Rio's long position.
The idea behind Micron Technology and Petro Rio SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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