Correlation Between Micron Technology and Novo Nordisk
Can any of the company-specific risk be diversified away by investing in both Micron Technology and Novo Nordisk 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 Novo Nordisk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Novo Nordisk AS, you can compare the effects of market volatilities on Micron Technology and Novo Nordisk 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 Novo Nordisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Novo Nordisk.
Diversification Opportunities for Micron Technology and Novo Nordisk
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Micron and Novo is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Novo Nordisk AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novo Nordisk AS 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 Novo Nordisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novo Nordisk AS has no effect on the direction of Micron Technology i.e., Micron Technology and Novo Nordisk go up and down completely randomly.
Pair Corralation between Micron Technology and Novo Nordisk
Assuming the 90 days trading horizon Micron Technology is expected to generate 1.12 times more return on investment than Novo Nordisk. However, Micron Technology is 1.12 times more volatile than Novo Nordisk AS. It trades about -0.03 of its potential returns per unit of risk. Novo Nordisk AS is currently generating about -0.16 per unit of risk. If you would invest 10,200 in Micron Technology on August 27, 2024 and sell it today you would lose (300.00) from holding Micron Technology or give up 2.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micron Technology vs. Novo Nordisk AS
Performance |
| Timeline |
| Micron Technology |
| Novo Nordisk AS |
Micron Technology and Novo Nordisk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Novo Nordisk
The main advantage of trading using opposite Micron Technology and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Novo Nordisk 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 Novo Nordisk will offset losses from the drop in Novo Nordisk's long position.| Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Broadcom | Micron Technology vs. NXP Semiconductors NV | Micron Technology vs. STMicroelectronics NV |
| Novo Nordisk vs. Spotify Technology SA | Novo Nordisk vs. Raytheon Technologies | Novo Nordisk vs. Micron Technology | Novo Nordisk vs. Zoom Video Communications |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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