Correlation Between Home First and MIC Electronics

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

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

Diversification Opportunities for Home First and MIC Electronics

0.75

Correlation Coefficient

Home First  MIC Electronics

Poor diversification

The 3 months correlation between Home and MIC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Home First Finance and MIC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIC Electronics and Home First 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 Home First Finance 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 Home First i.e., Home First and MIC Electronics go up and down completely randomly.

Pair Corralation between Home First and MIC Electronics

Assuming the 90 days trading horizon Home First is expected to generate 8.34 times less return on investment than MIC Electronics. But when comparing it to its historical volatility, Home First Finance is 1.37 times less risky than MIC Electronics. It trades about 0.02 of its potential returns per unit of risk. MIC Electronics Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,390  in MIC Electronics Limited on September 20, 2024 and sell it today you would earn a total of  5,211  from holding MIC Electronics Limited or generate 153.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.18%
Values	Daily Returns

Home First Finance  vs.  MIC Electronics Limited

Home First Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home First Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 latest uncertain performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Home First and MIC Electronics

The main advantage of trading using opposite Home First and MIC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home First 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 Home First Finance 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.