Correlation Between STMicroelectronics and Micron Technology
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics 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 STMicroelectronics and Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Micron Technology, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Micron Technology.
Diversification Opportunities for STMicroelectronics and Micron Technology
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between STMicroelectronics and Micron is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology and STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and Micron Technology go up and down completely randomly.
Pair Corralation between STMicroelectronics and Micron Technology
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Micron Technology. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.27 times less risky than Micron Technology. The stock trades about -0.22 of its potential returns per unit of risk. The Micron Technology is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 10,668 in Micron Technology on November 18, 2024 and sell it today you would lose (1,200) from holding Micron Technology or give up 11.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Micron Technology
Performance |
| Timeline |
| STMicroelectronics |
| Micron Technology |
STMicroelectronics and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Micron Technology
The main advantage of trading using opposite STMicroelectronics and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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.| STMicroelectronics vs. Keysight Technologies, | STMicroelectronics vs. GX AI TECH | STMicroelectronics vs. Iron Mountain Incorporated | STMicroelectronics vs. TechnipFMC plc |
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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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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