Correlation Between Intel and Micropac Industries

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

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

Diversification Opportunities for Intel and Micropac Industries

0.69

Correlation Coefficient

Intel  Micropac Industries

Poor diversification

The 3 months correlation between Intel and Micropac is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Micropac Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micropac Industries and Intel 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 Intel are associated (or correlated) with Micropac Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micropac Industries has no effect on the direction of Intel i.e., Intel and Micropac Industries go up and down completely randomly.

Pair Corralation between Intel and Micropac Industries

Given the investment horizon of 90 days Intel is expected to generate 1.65 times less return on investment than Micropac Industries. But when comparing it to its historical volatility, Intel is 1.37 times less risky than Micropac Industries. It trades about 0.12 of its potential returns per unit of risk. Micropac Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,475  in Micropac Industries on September 2, 2024 and sell it today you would earn a total of  506.00  from holding Micropac Industries or generate 34.31% return on investment over 90 days.

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

Intel  vs.  Micropac Industries

Intel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Intel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Micropac Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Micropac Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Micropac Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intel and Micropac Industries

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

The idea behind Intel and Micropac Industries 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.