Correlation Between MIC Electronics and Orissa Minerals

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Can any of the company-specific risk be diversified away by investing in both MIC Electronics and Orissa Minerals 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 MIC Electronics and Orissa Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MIC Electronics Limited and The Orissa Minerals, you can compare the effects of market volatilities on MIC Electronics and Orissa Minerals 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 MIC Electronics with a short position of Orissa Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of MIC Electronics and Orissa Minerals.

Diversification Opportunities for MIC Electronics and Orissa Minerals

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between MIC and Orissa is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding MIC Electronics Limited and The Orissa Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orissa Minerals and MIC Electronics 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 MIC Electronics Limited are associated (or correlated) with Orissa Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orissa Minerals has no effect on the direction of MIC Electronics i.e., MIC Electronics and Orissa Minerals go up and down completely randomly.

Pair Corralation between MIC Electronics and Orissa Minerals

Assuming the 90 days trading horizon MIC Electronics Limited is expected to generate 1.33 times more return on investment than Orissa Minerals. However, MIC Electronics is 1.33 times more volatile than The Orissa Minerals. It trades about -0.01 of its potential returns per unit of risk. The Orissa Minerals is currently generating about -0.02 per unit of risk. If you would invest  9,446  in MIC Electronics Limited on September 13, 2024 and sell it today you would lose (407.00) from holding MIC Electronics Limited or give up 4.31% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

MIC Electronics Limited  vs.  The Orissa Minerals

 Performance 
       Timeline  
MIC Electronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MIC Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, MIC Electronics is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.
Orissa Minerals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Orissa Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Orissa Minerals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

MIC Electronics and Orissa Minerals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MIC Electronics and Orissa Minerals

The main advantage of trading using opposite MIC Electronics and Orissa Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MIC Electronics position performs unexpectedly, Orissa Minerals 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 Orissa Minerals will offset losses from the drop in Orissa Minerals' long position.
The idea behind MIC Electronics Limited and The Orissa Minerals 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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