Correlation Between Micron Technology and Standard Lithium
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Standard Lithium 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 Standard Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Standard Lithium, you can compare the effects of market volatilities on Micron Technology and Standard Lithium 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 Standard Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Standard Lithium.
Diversification Opportunities for Micron Technology and Standard Lithium
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Micron and Standard is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium 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 Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of Micron Technology i.e., Micron Technology and Standard Lithium go up and down completely randomly.
Pair Corralation between Micron Technology and Standard Lithium
Allowing for the 90-day total investment horizon Micron Technology is expected to generate 0.6 times more return on investment than Standard Lithium. However, Micron Technology is 1.67 times less risky than Standard Lithium. It trades about 0.04 of its potential returns per unit of risk. Standard Lithium is currently generating about 0.02 per unit of risk. If you would invest 8,121 in Micron Technology on September 12, 2024 and sell it today you would earn a total of 1,689 from holding Micron Technology or generate 20.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Micron Technology vs. Standard Lithium
Performance |
| Timeline |
| Micron Technology |
| Standard Lithium |
Micron Technology and Standard Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Standard Lithium
The main advantage of trading using opposite Micron Technology and Standard Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Standard Lithium 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 Standard Lithium will offset losses from the drop in Standard Lithium's long position.| Micron Technology vs. NVIDIA | Micron Technology vs. Intel | Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Marvell Technology Group |
| Standard Lithium vs. BHP Group Limited | Standard Lithium vs. Vale SA | Standard Lithium vs. Superior Plus Corp | Standard Lithium vs. SIVERS SEMICONDUCTORS AB |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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