Correlation Between Micron Technology and ASE Industrial

Can any of the company-specific risk be diversified away by investing in both Micron Technology and ASE Industrial 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 ASE Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Micron Technology and ASE Industrial Holding, you can compare the effects of market volatilities on Micron Technology and ASE Industrial 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 ASE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and ASE Industrial.

Diversification Opportunities for Micron Technology and ASE Industrial

0.82

Correlation Coefficient

Micron Technology  ASE Industrial

Very poor diversification

The 1 month correlation between Micron and ASE is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding 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 ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Micron Technology i.e., Micron Technology and ASE Industrial go up and down completely randomly.

Pair Corralation between Micron Technology and ASE Industrial

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.4 times more return on investment than ASE Industrial. However, Micron Technology is 1.4 times more volatile than ASE Industrial Holding. It trades about -0.04 of its potential returns per unit of risk. ASE Industrial Holding is currently generating about -0.11 per unit of risk. If you would invest  12,295  in Micron Technology on February 7, 2024 and sell it today you would lose (374.00) from holding Micron Technology or give up 3.04% of portfolio value over 90 days.

Time Period	1 Month [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Micron Technology  vs.  ASE Industrial Holding

Micron Technology

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Micron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ASE Industrial Holding

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days ASE Industrial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Micron Technology and ASE Industrial

The main advantage of trading using opposite Micron Technology and ASE Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, ASE Industrial 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 ASE Industrial will offset losses from the drop in ASE Industrial's long position.

The idea behind Micron Technology and ASE Industrial Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.