Correlation Between Micron Technology and SPI Energy

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

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

Diversification Opportunities for Micron Technology and SPI Energy

-0.56

Correlation Coefficient

Micron Technology  SPI Energy

Excellent diversification

The 3 months correlation between Micron and SPI is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and SPI Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPI Energy 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 SPI Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPI Energy has no effect on the direction of Micron Technology i.e., Micron Technology and SPI Energy go up and down completely randomly.

Pair Corralation between Micron Technology and SPI Energy

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 0.53 times more return on investment than SPI Energy. However, Micron Technology is 1.87 times less risky than SPI Energy. It trades about -0.05 of its potential returns per unit of risk. SPI Energy Co is currently generating about -0.05 per unit of risk. If you would invest  11,702  in Micron Technology on January 25, 2024 and sell it today you would lose (456.00) from holding Micron Technology or give up 3.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Micron Technology  vs.  SPI Energy Co

Micron Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

SPI Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPI Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, SPI Energy is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Micron Technology and SPI Energy

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

The idea behind Micron Technology and SPI Energy Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.