Correlation Between V Mart and MIC Electronics

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

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

Diversification Opportunities for V Mart and MIC Electronics

0.61

Correlation Coefficient

V Mart  MIC Electronics

Poor diversification

The 3 months correlation between VMART and MIC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding V Mart Retail 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 V Mart 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 V Mart Retail 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 V Mart i.e., V Mart and MIC Electronics go up and down completely randomly.

Pair Corralation between V Mart and MIC Electronics

Assuming the 90 days trading horizon V Mart Retail Limited is expected to under-perform the MIC Electronics. But the stock apears to be less risky and, when comparing its historical volatility, V Mart Retail Limited is 1.0 times less risky than MIC Electronics. The stock trades about -0.1 of its potential returns per unit of risk. The MIC Electronics Limited is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  9,716  in MIC Electronics Limited on October 8, 2024 and sell it today you would lose (1,034) from holding MIC Electronics Limited or give up 10.64% of portfolio value over 90 days.

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

V Mart Retail Limited  vs.  MIC Electronics Limited

V Mart Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days V Mart Retail Limited 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 basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 latest unsteady 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 V Mart and MIC Electronics

The main advantage of trading using opposite V Mart and MIC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V Mart 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 V Mart Retail 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.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.