Correlation Between Micron Technology and Nutrien
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Nutrien 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 Nutrien into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Nutrien, you can compare the effects of market volatilities on Micron Technology and Nutrien 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 Nutrien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Nutrien.
Diversification Opportunities for Micron Technology and Nutrien
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Micron and Nutrien is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien 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 Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of Micron Technology i.e., Micron Technology and Nutrien go up and down completely randomly.
Pair Corralation between Micron Technology and Nutrien
Assuming the 90 days trading horizon Micron Technology is expected to generate 1.68 times more return on investment than Nutrien. However, Micron Technology is 1.68 times more volatile than Nutrien. It trades about 0.06 of its potential returns per unit of risk. Nutrien is currently generating about 0.0 per unit of risk. If you would invest 6,905 in Micron Technology on September 4, 2024 and sell it today you would earn a total of 2,591 from holding Micron Technology or generate 37.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micron Technology vs. Nutrien
Performance |
| Timeline |
| Micron Technology |
| Nutrien |
Micron Technology and Nutrien Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Nutrien
The main advantage of trading using opposite Micron Technology and Nutrien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Nutrien 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 Nutrien will offset losses from the drop in Nutrien's long position.| Micron Technology vs. Retail Estates NV | Micron Technology vs. Sekisui Chemical Co | Micron Technology vs. Westlake Chemical | Micron Technology vs. Soken Chemical Engineering |
| Nutrien vs. Micron Technology | Nutrien vs. Perseus Mining Limited | Nutrien vs. AECOM TECHNOLOGY | Nutrien vs. ADRIATIC METALS LS 013355 |
Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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