Correlation Between MIC Electronics and Reliance Infrastructure

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

Diversification Opportunities for MIC Electronics and Reliance Infrastructure

0.29

Correlation Coefficient

MIC Electronics  Reliance Infrastructure

Modest diversification

The 3 months correlation between MIC and Reliance is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding MIC Electronics Limited and Reliance Infrastructure Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Infrastructure 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 Reliance Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Infrastructure has no effect on the direction of MIC Electronics i.e., MIC Electronics and Reliance Infrastructure go up and down completely randomly.

Pair Corralation between MIC Electronics and Reliance Infrastructure

Assuming the 90 days trading horizon MIC Electronics Limited is expected to under-perform the Reliance Infrastructure. But the stock apears to be less risky and, when comparing its historical volatility, MIC Electronics Limited is 1.38 times less risky than Reliance Infrastructure. The stock trades about -0.18 of its potential returns per unit of risk. The Reliance Infrastructure Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  29,340  in Reliance Infrastructure Limited on October 12, 2024 and sell it today you would lose (635.00) from holding Reliance Infrastructure Limited or give up 2.16% of portfolio value over 90 days.

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

MIC Electronics Limited  vs.  Reliance Infrastructure Limite

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 weak 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.

Reliance Infrastructure

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Reliance Infrastructure Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Reliance Infrastructure is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MIC Electronics and Reliance Infrastructure

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

The idea behind MIC Electronics Limited and Reliance Infrastructure 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.