Correlation Between Patanjali Foods and MIC Electronics

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

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

Diversification Opportunities for Patanjali Foods and MIC Electronics

-0.38

Correlation Coefficient

Patanjali Foods  MIC Electronics

Very good diversification

The 3 months correlation between Patanjali and MIC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Patanjali Foods Limited and MIC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIC Electronics and Patanjali Foods 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 Patanjali Foods Limited are associated (or correlated) with MIC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIC Electronics has no effect on the direction of Patanjali Foods i.e., Patanjali Foods and MIC Electronics go up and down completely randomly.

Pair Corralation between Patanjali Foods and MIC Electronics

Assuming the 90 days trading horizon Patanjali Foods Limited is expected to under-perform the MIC Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Patanjali Foods Limited is 1.51 times less risky than MIC Electronics. The stock trades about -0.03 of its potential returns per unit of risk. The MIC Electronics Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,860  in MIC Electronics Limited on September 13, 2024 and sell it today you would earn a total of  179.00  from holding MIC Electronics Limited or generate 2.02% return on investment over 90 days.

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

Patanjali Foods Limited  vs.  MIC Electronics Limited

Patanjali Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

MIC Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MIC Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, MIC Electronics is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Patanjali Foods and MIC Electronics

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

The idea behind Patanjali Foods Limited and MIC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.