Correlation Between Vidrala SA and Micron Technology

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

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

Diversification Opportunities for Vidrala SA and Micron Technology

0.06

Correlation Coefficient

Vidrala SA  Micron Technology

Significant diversification

The 3 months correlation between Vidrala and Micron is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Vidrala SA and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and Vidrala SA 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 Vidrala SA 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 Vidrala SA i.e., Vidrala SA and Micron Technology go up and down completely randomly.

Pair Corralation between Vidrala SA and Micron Technology

Assuming the 90 days horizon Vidrala SA is expected to generate 0.43 times more return on investment than Micron Technology. However, Vidrala SA is 2.34 times less risky than Micron Technology. It trades about 0.02 of its potential returns per unit of risk. Micron Technology is currently generating about -0.01 per unit of risk. If you would invest  8,814  in Vidrala SA on October 9, 2024 and sell it today you would earn a total of  326.00  from holding Vidrala SA or generate 3.7% return on investment over 90 days.

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

Vidrala SA  vs.  Micron Technology

Vidrala SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vidrala SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vidrala SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Micron Technology

Risk-Adjusted Performance

2 of 100

Weak

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. In spite of comparatively unsteady basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vidrala SA and Micron Technology

The main advantage of trading using opposite Vidrala SA and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vidrala SA 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 Vidrala SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.