Correlation Between Surge Components and Micropac Industries

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

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

Diversification Opportunities for Surge Components and Micropac Industries

0.14

Correlation Coefficient

Surge Components  Micropac Industries

Average diversification

The 3 months correlation between Surge and Micropac is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Surge Components and Micropac Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micropac Industries and Surge Components 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 Surge Components are associated (or correlated) with Micropac Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micropac Industries has no effect on the direction of Surge Components i.e., Surge Components and Micropac Industries go up and down completely randomly.

Pair Corralation between Surge Components and Micropac Industries

Given the investment horizon of 90 days Surge Components is expected to under-perform the Micropac Industries. But the pink sheet apears to be less risky and, when comparing its historical volatility, Surge Components is 1.37 times less risky than Micropac Industries. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Micropac Industries is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,351  in Micropac Industries on October 21, 2024 and sell it today you would earn a total of  646.00  from holding Micropac Industries or generate 47.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.37%
Values	Daily Returns

Surge Components  vs.  Micropac Industries

Surge Components

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Surge Components has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Surge Components is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Micropac Industries

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Micropac Industries has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Surge Components and Micropac Industries

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

The idea behind Surge Components and Micropac Industries 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.