Correlation Between Allied Blenders and MIC Electronics

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

By analyzing existing cross correlation between Allied Blenders Distillers and MIC Electronics Limited, you can compare the effects of market volatilities on Allied Blenders and MIC Electronics 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 Allied Blenders with a short position of MIC Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Blenders and MIC Electronics.

Diversification Opportunities for Allied Blenders and MIC Electronics

-0.32

Correlation Coefficient

Allied Blenders  MIC Electronics

Very good diversification

The 3 months correlation between Allied and MIC is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Allied Blenders Distillers and MIC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIC Electronics and Allied Blenders 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 Allied Blenders Distillers are associated (or correlated) with MIC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIC Electronics has no effect on the direction of Allied Blenders i.e., Allied Blenders and MIC Electronics go up and down completely randomly.

Pair Corralation between Allied Blenders and MIC Electronics

Assuming the 90 days trading horizon Allied Blenders Distillers is expected to generate 1.04 times more return on investment than MIC Electronics. However, Allied Blenders is 1.04 times more volatile than MIC Electronics Limited. It trades about -0.12 of its potential returns per unit of risk. MIC Electronics Limited is currently generating about -0.25 per unit of risk. If you would invest  41,745  in Allied Blenders Distillers on October 25, 2024 and sell it today you would lose (2,445) from holding Allied Blenders Distillers or give up 5.86% of portfolio value over 90 days.

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

Allied Blenders Distillers  vs.  MIC Electronics Limited

Allied Blenders Dist

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Blenders Distillers are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Allied Blenders unveiled solid returns over the last few months and may actually be approaching a breakup point.

MIC Electronics

Risk-Adjusted Performance

0 of 100

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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Allied Blenders and MIC Electronics

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

The idea behind Allied Blenders Distillers and MIC Electronics Limited 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.