Correlation Between Micropac Industries and Cps Technologies

Can any of the company-specific risk be diversified away by investing in both Micropac Industries and Cps Technologies 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 Micropac Industries and Cps Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Micropac Industries and Cps Technologies, you can compare the effects of market volatilities on Micropac Industries and Cps Technologies 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 Micropac Industries with a short position of Cps Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micropac Industries and Cps Technologies.

Diversification Opportunities for Micropac Industries and Cps Technologies

0.43

Correlation Coefficient

Micropac Industries  Cps Technologies

Very weak diversification

The 3 months correlation between Micropac and Cps is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Micropac Industries and Cps Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cps Technologies and Micropac Industries 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 Micropac Industries are associated (or correlated) with Cps Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cps Technologies has no effect on the direction of Micropac Industries i.e., Micropac Industries and Cps Technologies go up and down completely randomly.

Pair Corralation between Micropac Industries and Cps Technologies

Given the investment horizon of 90 days Micropac Industries is expected to generate 1.51 times more return on investment than Cps Technologies. However, Micropac Industries is 1.51 times more volatile than Cps Technologies. It trades about 0.14 of its potential returns per unit of risk. Cps Technologies is currently generating about 0.09 per unit of risk. If you would invest  1,475  in Micropac Industries on September 2, 2024 and sell it today you would earn a total of  506.00  from holding Micropac Industries or generate 34.31% return on investment over 90 days.

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

Micropac Industries  vs.  Cps Technologies

Micropac Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Micropac Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Micropac Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cps Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cps Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Cps Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micropac Industries and Cps Technologies

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

The idea behind Micropac Industries and Cps Technologies 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.