Correlation Between MIC Electronics and Home First

Can any of the company-specific risk be diversified away by investing in both MIC Electronics and Home First 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 Home First 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 Home First Finance, you can compare the effects of market volatilities on MIC Electronics and Home First 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 Home First. Check out your portfolio center. Please also check ongoing floating volatility patterns of MIC Electronics and Home First.

Diversification Opportunities for MIC Electronics and Home First

0.75

Correlation Coefficient

MIC Electronics  Home First

Poor diversification

The 3 months correlation between MIC and Home is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding MIC Electronics Limited and Home First Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home First Finance 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 Home First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home First Finance has no effect on the direction of MIC Electronics i.e., MIC Electronics and Home First go up and down completely randomly.

Pair Corralation between MIC Electronics and Home First

Assuming the 90 days trading horizon MIC Electronics Limited is expected to generate 1.47 times more return on investment than Home First. However, MIC Electronics is 1.47 times more volatile than Home First Finance. It trades about 0.13 of its potential returns per unit of risk. Home First Finance is currently generating about 0.04 per unit of risk. 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	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

MIC Electronics Limited  vs.  Home First Finance

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.

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.

Pair Trading with MIC Electronics and Home First

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

The idea behind MIC Electronics Limited and Home First Finance 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.