Correlation Between MIRC Electronics and TVS Electronics

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

Diversification Opportunities for MIRC Electronics and TVS Electronics

0.81

Correlation Coefficient

MIRC Electronics  TVS Electronics

Very poor diversification

The 3 months correlation between MIRC and TVS is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding MIRC Electronics Limited and TVS Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TVS Electronics 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 TVS Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TVS Electronics has no effect on the direction of MIRC Electronics i.e., MIRC Electronics and TVS Electronics go up and down completely randomly.

Pair Corralation between MIRC Electronics and TVS Electronics

Assuming the 90 days trading horizon MIRC Electronics is expected to generate 1.43 times less return on investment than TVS Electronics. In addition to that, MIRC Electronics is 1.19 times more volatile than TVS Electronics Limited. It trades about 0.06 of its total potential returns per unit of risk. TVS Electronics Limited is currently generating about 0.11 per unit of volatility. If you would invest  34,780  in TVS Electronics Limited on October 25, 2024 and sell it today you would earn a total of  5,910  from holding TVS Electronics Limited or generate 16.99% return on investment over 90 days.

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

MIRC Electronics Limited  vs.  TVS Electronics Limited

MIRC Electronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MIRC Electronics Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, MIRC Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

TVS Electronics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TVS Electronics Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, TVS Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MIRC Electronics and TVS Electronics

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

The idea behind MIRC Electronics Limited and TVS 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.