Correlation Between Micropac Industries and SCI Engineered

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

By analyzing existing cross correlation between Micropac Industries and SCI Engineered Materials, you can compare the effects of market volatilities on Micropac Industries and SCI Engineered 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 SCI Engineered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micropac Industries and SCI Engineered.

Diversification Opportunities for Micropac Industries and SCI Engineered

-0.41

Correlation Coefficient

Micropac Industries  SCI Engineered

Very good diversification

The 3 months correlation between Micropac and SCI is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Micropac Industries and SCI Engineered Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCI Engineered Materials 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 SCI Engineered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCI Engineered Materials has no effect on the direction of Micropac Industries i.e., Micropac Industries and SCI Engineered go up and down completely randomly.

Pair Corralation between Micropac Industries and SCI Engineered

Given the investment horizon of 90 days Micropac Industries is expected to generate 0.03 times more return on investment than SCI Engineered. However, Micropac Industries is 33.54 times less risky than SCI Engineered. It trades about 0.41 of its potential returns per unit of risk. SCI Engineered Materials is currently generating about -0.03 per unit of risk. If you would invest  1,985  in Micropac Industries on October 6, 2024 and sell it today you would earn a total of  12.00  from holding Micropac Industries or generate 0.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Micropac Industries  vs.  SCI Engineered Materials

Micropac Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Micropac Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Micropac Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

SCI Engineered Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SCI Engineered Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, SCI Engineered is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Micropac Industries and SCI Engineered

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

The idea behind Micropac Industries and SCI Engineered Materials 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.