Correlation Between SMA Solar and Micron Technology
Can any of the company-specific risk be diversified away by investing in both SMA Solar 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 SMA Solar and Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA Solar Technology and Micron Technology, you can compare the effects of market volatilities on SMA Solar 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 SMA Solar with a short position of Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Micron Technology.
Diversification Opportunities for SMA Solar and Micron Technology
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SMA and Micron is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and SMA Solar 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 SMA Solar Technology 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 SMA Solar i.e., SMA Solar and Micron Technology go up and down completely randomly.
Pair Corralation between SMA Solar and Micron Technology
Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the Micron Technology. In addition to that, SMA Solar is 1.3 times more volatile than Micron Technology. It trades about -0.07 of its total potential returns per unit of risk. Micron Technology is currently generating about 0.06 per unit of volatility. If you would invest 4,941 in Micron Technology on November 1, 2024 and sell it today you would earn a total of 3,953 from holding Micron Technology or generate 80.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
SMA Solar Technology vs. Micron Technology
Performance |
| Timeline |
| SMA Solar Technology |
| Micron Technology |
SMA Solar and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Micron Technology
The main advantage of trading using opposite SMA Solar and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar 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.| SMA Solar vs. Salesforce | SMA Solar vs. Insteel Industries | SMA Solar vs. MARKET VECTR RETAIL | SMA Solar vs. Xiwang Special Steel |
| Micron Technology vs. Apple Inc | Micron Technology vs. Apple Inc | Micron Technology vs. Apple Inc | Micron Technology vs. Apple Inc |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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