Correlation Between Micropac Industries and SigmaTron International

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

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

Diversification Opportunities for Micropac Industries and SigmaTron International

0.07

Correlation Coefficient

Micropac Industries  SigmaTron International

Significant diversification

The 3 months correlation between Micropac and SigmaTron is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Micropac Industries and SigmaTron International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SigmaTron International 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 SigmaTron International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SigmaTron International has no effect on the direction of Micropac Industries i.e., Micropac Industries and SigmaTron International go up and down completely randomly.

Pair Corralation between Micropac Industries and SigmaTron International

Given the investment horizon of 90 days Micropac Industries is expected to generate 1.17 times more return on investment than SigmaTron International. However, Micropac Industries is 1.17 times more volatile than SigmaTron International. It trades about 0.14 of its potential returns per unit of risk. SigmaTron International is currently generating about -0.03 per unit of risk. If you would invest  1,475  in Micropac Industries on August 31, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Micropac Industries  vs.  SigmaTron International

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.

SigmaTron International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SigmaTron International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, SigmaTron International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Micropac Industries and SigmaTron International

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

The idea behind Micropac Industries and SigmaTron International 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.