Correlation Between NI Holdings and Micron Technology

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

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

Diversification Opportunities for NI Holdings and Micron Technology

-0.02

Correlation Coefficient

NI Holdings  Micron Technology

Good diversification

The 3 months correlation between NODK and Micron is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and NI Holdings 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 NI Holdings are associated (or correlated) with Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of NI Holdings i.e., NI Holdings and Micron Technology go up and down completely randomly.

Pair Corralation between NI Holdings and Micron Technology

Given the investment horizon of 90 days NI Holdings is expected to generate 0.52 times more return on investment than Micron Technology. However, NI Holdings is 1.91 times less risky than Micron Technology. It trades about 0.05 of its potential returns per unit of risk. Micron Technology is currently generating about 0.01 per unit of risk. If you would invest  1,343  in NI Holdings on October 2, 2024 and sell it today you would earn a total of  224.00  from holding NI Holdings or generate 16.68% return on investment over 90 days.

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

NI Holdings  vs.  Micron Technology

NI Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with NI Holdings and Micron Technology

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

The idea behind NI Holdings and Micron Technology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.