Correlation Between Electronics Mart and IdeaForge Technology

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

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

Diversification Opportunities for Electronics Mart and IdeaForge Technology

0.79

Correlation Coefficient

Electronics Mart  IdeaForge Technology

Poor diversification

The 3 months correlation between Electronics and IdeaForge is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Electronics Mart India and ideaForge Technology Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ideaForge Technology and Electronics Mart 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 Electronics Mart India are associated (or correlated) with IdeaForge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ideaForge Technology has no effect on the direction of Electronics Mart i.e., Electronics Mart and IdeaForge Technology go up and down completely randomly.

Pair Corralation between Electronics Mart and IdeaForge Technology

Assuming the 90 days trading horizon Electronics Mart India is expected to under-perform the IdeaForge Technology. In addition to that, Electronics Mart is 1.11 times more volatile than ideaForge Technology Limited. It trades about -0.07 of its total potential returns per unit of risk. ideaForge Technology Limited is currently generating about -0.02 per unit of volatility. If you would invest  66,330  in ideaForge Technology Limited on September 19, 2024 and sell it today you would lose (2,260) from holding ideaForge Technology Limited or give up 3.41% of portfolio value over 90 days.

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

Electronics Mart India  vs.  ideaForge Technology Limited

Electronics Mart India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electronics Mart India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ideaForge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ideaForge Technology Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IdeaForge Technology is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Electronics Mart and IdeaForge Technology

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

The idea behind Electronics Mart India and ideaForge Technology 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.