Correlation Between MIC Electronics and IOL Chemicals
Can any of the company-specific risk be diversified away by investing in both MIC Electronics and IOL Chemicals 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 MIC Electronics and IOL Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MIC Electronics Limited and IOL Chemicals and, you can compare the effects of market volatilities on MIC Electronics and IOL Chemicals 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 MIC Electronics with a short position of IOL Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of MIC Electronics and IOL Chemicals.
Diversification Opportunities for MIC Electronics and IOL Chemicals
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MIC and IOL is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding MIC Electronics Limited and IOL Chemicals and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IOL Chemicals and MIC Electronics 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 MIC Electronics Limited are associated (or correlated) with IOL Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IOL Chemicals has no effect on the direction of MIC Electronics i.e., MIC Electronics and IOL Chemicals go up and down completely randomly.
Pair Corralation between MIC Electronics and IOL Chemicals
Assuming the 90 days trading horizon MIC Electronics Limited is expected to under-perform the IOL Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, MIC Electronics Limited is 1.34 times less risky than IOL Chemicals. The stock trades about -0.23 of its potential returns per unit of risk. The IOL Chemicals and is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 42,845 in IOL Chemicals and on October 15, 2024 and sell it today you would lose (1,930) from holding IOL Chemicals and or give up 4.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MIC Electronics Limited vs. IOL Chemicals and
Performance |
| Timeline |
| MIC Electronics |
| IOL Chemicals |
MIC Electronics and IOL Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MIC Electronics and IOL Chemicals
The main advantage of trading using opposite MIC Electronics and IOL Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MIC Electronics position performs unexpectedly, IOL Chemicals 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 IOL Chemicals will offset losses from the drop in IOL Chemicals' long position.| MIC Electronics vs. HT Media Limited | MIC Electronics vs. Zee Entertainment Enterprises | MIC Electronics vs. Next Mediaworks Limited | MIC Electronics vs. SBI Life Insurance |
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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