Correlation Between MIRC Electronics and Federal Bank

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

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

Diversification Opportunities for MIRC Electronics and Federal Bank

-0.08

Correlation Coefficient

MIRC Electronics  Federal Bank

Good diversification

The 3 months correlation between MIRC and Federal is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding MIRC Electronics Limited and The Federal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Bank and MIRC 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 MIRC Electronics Limited are associated (or correlated) with Federal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Bank has no effect on the direction of MIRC Electronics i.e., MIRC Electronics and Federal Bank go up and down completely randomly.

Pair Corralation between MIRC Electronics and Federal Bank

Assuming the 90 days trading horizon MIRC Electronics Limited is expected to generate 1.74 times more return on investment than Federal Bank. However, MIRC Electronics is 1.74 times more volatile than The Federal Bank. It trades about 0.0 of its potential returns per unit of risk. The Federal Bank is currently generating about -0.2 per unit of risk. If you would invest  2,377  in MIRC Electronics Limited on October 10, 2024 and sell it today you would lose (17.00) from holding MIRC Electronics Limited or give up 0.72% of portfolio value over 90 days.

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

MIRC Electronics Limited  vs.  The Federal Bank

MIRC Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MIRC Electronics Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, MIRC Electronics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Federal Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Federal Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Federal Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MIRC Electronics and Federal Bank

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

The idea behind MIRC Electronics Limited and The Federal Bank 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.