Correlation Between GPT Healthcare and MIC Electronics

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

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

Diversification Opportunities for GPT Healthcare and MIC Electronics

0.98

Correlation Coefficient

GPT Healthcare  MIC Electronics

Almost no diversification

The 3 months correlation between GPT and MIC is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding GPT Healthcare and MIC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIC Electronics and GPT Healthcare 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 GPT Healthcare 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 GPT Healthcare i.e., GPT Healthcare and MIC Electronics go up and down completely randomly.

Pair Corralation between GPT Healthcare and MIC Electronics

Assuming the 90 days trading horizon GPT Healthcare is expected to generate 0.64 times more return on investment than MIC Electronics. However, GPT Healthcare is 1.57 times less risky than MIC Electronics. It trades about -0.16 of its potential returns per unit of risk. MIC Electronics Limited is currently generating about -0.14 per unit of risk. If you would invest  18,539  in GPT Healthcare on December 24, 2024 and sell it today you would lose (3,927) from holding GPT Healthcare or give up 21.18% of portfolio value over 90 days.

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

GPT Healthcare  vs.  MIC Electronics Limited

GPT Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days GPT Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

MIC Electronics

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with GPT Healthcare and MIC Electronics

The main advantage of trading using opposite GPT Healthcare and MIC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GPT Healthcare 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 GPT Healthcare 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.