Correlation Between Micropac Industries and CTS
Can any of the company-specific risk be diversified away by investing in both Micropac Industries and CTS 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 Micropac Industries and CTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micropac Industries and CTS Corporation, you can compare the effects of market volatilities on Micropac Industries and CTS 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 Micropac Industries with a short position of CTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micropac Industries and CTS.
Diversification Opportunities for Micropac Industries and CTS
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Micropac and CTS is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Micropac Industries and CTS Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTS Corporation and Micropac Industries 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 Micropac Industries are associated (or correlated) with CTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTS Corporation has no effect on the direction of Micropac Industries i.e., Micropac Industries and CTS go up and down completely randomly.
Pair Corralation between Micropac Industries and CTS
Given the investment horizon of 90 days Micropac Industries is expected to generate 1.74 times more return on investment than CTS. However, Micropac Industries is 1.74 times more volatile than CTS Corporation. It trades about 0.2 of its potential returns per unit of risk. CTS Corporation is currently generating about 0.19 per unit of risk. If you would invest 1,595 in Micropac Industries on August 24, 2024 and sell it today you would earn a total of 377.00 from holding Micropac Industries or generate 23.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micropac Industries vs. CTS Corp.
Performance |
| Timeline |
| Micropac Industries |
| CTS Corporation |
Micropac Industries and CTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micropac Industries and CTS
The main advantage of trading using opposite Micropac Industries and CTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micropac Industries position performs unexpectedly, CTS 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 CTS will offset losses from the drop in CTS's long position.| Micropac Industries vs. LGL Group | Micropac Industries vs. Deswell Industries | Micropac Industries vs. SigmaTron International | Micropac Industries vs. Daktronics |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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