Correlation Between Usha Martin and MIC Electronics

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

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

Diversification Opportunities for Usha Martin and MIC Electronics

0.7

Correlation Coefficient

Usha Martin  MIC Electronics

Poor diversification

The 3 months correlation between Usha and MIC is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Usha Martin Education and MIC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIC Electronics and Usha Martin 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 Usha Martin Education 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 Usha Martin i.e., Usha Martin and MIC Electronics go up and down completely randomly.

Pair Corralation between Usha Martin and MIC Electronics

Assuming the 90 days trading horizon Usha Martin Education is expected to under-perform the MIC Electronics. In addition to that, Usha Martin is 1.32 times more volatile than MIC Electronics Limited. It trades about -0.07 of its total potential returns per unit of risk. MIC Electronics Limited is currently generating about -0.05 per unit of volatility. If you would invest  8,631  in MIC Electronics Limited on October 26, 2024 and sell it today you would lose (793.00) from holding MIC Electronics Limited or give up 9.19% of portfolio value over 90 days.

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

Usha Martin Education  vs.  MIC Electronics Limited

Usha Martin Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Usha Martin Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 latest uncertain performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Usha Martin and MIC Electronics

The main advantage of trading using opposite Usha Martin and MIC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Usha Martin 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 Usha Martin Education 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.