Correlation Between MPI and Para Light

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

By analyzing existing cross correlation between MPI Corporation and Para Light Electronics, you can compare the effects of market volatilities on MPI and Para Light 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 MPI with a short position of Para Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPI and Para Light.

Diversification Opportunities for MPI and Para Light

0.38

Correlation Coefficient

MPI  Para Light

Weak diversification

The 3 months correlation between MPI and Para is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding MPI Corp. and Para Light Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Para Light Electronics and MPI 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 MPI Corporation are associated (or correlated) with Para Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Para Light Electronics has no effect on the direction of MPI i.e., MPI and Para Light go up and down completely randomly.

Pair Corralation between MPI and Para Light

Assuming the 90 days trading horizon MPI Corporation is expected to under-perform the Para Light. In addition to that, MPI is 4.1 times more volatile than Para Light Electronics. It trades about -0.08 of its total potential returns per unit of risk. Para Light Electronics is currently generating about -0.13 per unit of volatility. If you would invest  898.00  in Para Light Electronics on December 20, 2024 and sell it today you would lose (61.00) from holding Para Light Electronics or give up 6.79% of portfolio value over 90 days.

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

MPI Corp.  vs.  Para Light Electronics

MPI Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days MPI Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Para Light Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Para Light Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with MPI and Para Light

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

The idea behind MPI Corporation and Para Light Electronics 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.