Correlation Between Metalyst Forgings and MIC Electronics

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

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

Diversification Opportunities for Metalyst Forgings and MIC Electronics

0.0

Correlation Coefficient

Metalyst Forgings  MIC Electronics

Pay attention - limited upside

The 3 months correlation between Metalyst and MIC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Metalyst Forgings Limited and MIC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIC Electronics and Metalyst Forgings 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 Metalyst Forgings Limited 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 Metalyst Forgings i.e., Metalyst Forgings and MIC Electronics go up and down completely randomly.

Pair Corralation between Metalyst Forgings and MIC Electronics

Assuming the 90 days trading horizon Metalyst Forgings is expected to generate 11.22 times less return on investment than MIC Electronics. But when comparing it to its historical volatility, Metalyst Forgings Limited is 1.34 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  1,365  in MIC Electronics Limited on September 20, 2024 and sell it today you would earn a total of  7,236  from holding MIC Electronics Limited or generate 530.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Metalyst Forgings Limited  vs.  MIC Electronics Limited

Metalyst Forgings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metalyst Forgings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Metalyst Forgings is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the 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 Metalyst Forgings and MIC Electronics

The main advantage of trading using opposite Metalyst Forgings and MIC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metalyst Forgings 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 Metalyst Forgings Limited 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.