Correlation Between Micron Technology and ONEOK

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

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

Diversification Opportunities for Micron Technology and ONEOK

0.35

Correlation Coefficient

Micron Technology  ONEOK

Weak diversification

The 3 months correlation between Micron and ONEOK is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc 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 ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Micron Technology i.e., Micron Technology and ONEOK go up and down completely randomly.

Pair Corralation between Micron Technology and ONEOK

Assuming the 90 days trading horizon Micron Technology is expected to generate 19.22 times less return on investment than ONEOK. But when comparing it to its historical volatility, Micron Technology is 1.64 times less risky than ONEOK. It trades about 0.02 of its potential returns per unit of risk. ONEOK Inc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  26,962  in ONEOK Inc on September 1, 2024 and sell it today you would earn a total of  5,766  from holding ONEOK Inc or generate 21.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Micron Technology  vs.  ONEOK Inc

Micron Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ONEOK Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ONEOK Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, ONEOK sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micron Technology and ONEOK

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

The idea behind Micron Technology and ONEOK Inc 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.

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.