Correlation Between MIC Electronics and Chambal Fertilizers

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

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

Diversification Opportunities for MIC Electronics and Chambal Fertilizers

0.24

Correlation Coefficient

MIC Electronics  Chambal Fertilizers

Modest diversification

The 3 months correlation between MIC and Chambal is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding MIC Electronics Limited and Chambal Fertilizers Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chambal Fertilizers and MIC Electronics 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 MIC Electronics Limited are associated (or correlated) with Chambal Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chambal Fertilizers has no effect on the direction of MIC Electronics i.e., MIC Electronics and Chambal Fertilizers go up and down completely randomly.

Pair Corralation between MIC Electronics and Chambal Fertilizers

Assuming the 90 days trading horizon MIC Electronics Limited is expected to generate 1.37 times more return on investment than Chambal Fertilizers. However, MIC Electronics is 1.37 times more volatile than Chambal Fertilizers Chemicals. It trades about 0.13 of its potential returns per unit of risk. Chambal Fertilizers Chemicals is currently generating about 0.06 per unit of risk. If you would invest  1,275  in MIC Electronics Limited on October 10, 2024 and sell it today you would earn a total of  7,274  from holding MIC Electronics Limited or generate 570.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

MIC Electronics Limited  vs.  Chambal Fertilizers Chemicals

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

Chambal Fertilizers

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chambal Fertilizers Chemicals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Chambal Fertilizers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MIC Electronics and Chambal Fertilizers

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

The idea behind MIC Electronics Limited and Chambal Fertilizers Chemicals 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..