Correlation Between Tesla and Micron Technology

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

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

Diversification Opportunities for Tesla and Micron Technology

0.14

Correlation Coefficient

Tesla  Micron Technology

Average diversification

The 3 months correlation between Tesla and Micron is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Micron Technology go up and down completely randomly.

Pair Corralation between Tesla and Micron Technology

Assuming the 90 days trading horizon Tesla Inc is expected to generate 1.16 times more return on investment than Micron Technology. However, Tesla is 1.16 times more volatile than Micron Technology. It trades about 0.07 of its potential returns per unit of risk. Micron Technology is currently generating about 0.04 per unit of risk. If you would invest  423,834  in Tesla Inc on December 5, 2024 and sell it today you would earn a total of  140,341  from holding Tesla Inc or generate 33.11% return on investment over 90 days.

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

Tesla Inc  vs.  Micron Technology

Tesla Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Micron Technology

Risk-Adjusted Performance

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 fairly strong primary indicators, Micron Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tesla and Micron Technology

The main advantage of trading using opposite Tesla and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.