Correlation Between Shipping and MIRC Electronics

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Can any of the company-specific risk be diversified away by investing in both Shipping and MIRC 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 Shipping and MIRC Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shipping and MIRC Electronics Limited, you can compare the effects of market volatilities on Shipping and MIRC 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 Shipping with a short position of MIRC Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shipping and MIRC Electronics.

Diversification Opportunities for Shipping and MIRC Electronics

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Shipping and MIRC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Shipping and MIRC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIRC Electronics and Shipping 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 Shipping are associated (or correlated) with MIRC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIRC Electronics has no effect on the direction of Shipping i.e., Shipping and MIRC Electronics go up and down completely randomly.

Pair Corralation between Shipping and MIRC Electronics

Assuming the 90 days trading horizon Shipping is expected to generate 0.96 times more return on investment than MIRC Electronics. However, Shipping is 1.04 times less risky than MIRC Electronics. It trades about 0.06 of its potential returns per unit of risk. MIRC Electronics Limited is currently generating about 0.03 per unit of risk. If you would invest  14,677  in Shipping on September 4, 2024 and sell it today you would earn a total of  8,751  from holding Shipping or generate 59.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.3%
ValuesDaily Returns

Shipping  vs.  MIRC Electronics Limited

 Performance 
       Timeline  
Shipping 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
MIRC Electronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MIRC Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Shipping and MIRC Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shipping and MIRC Electronics

The main advantage of trading using opposite Shipping and MIRC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shipping position performs unexpectedly, MIRC 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 MIRC Electronics will offset losses from the drop in MIRC Electronics' long position.
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The idea behind Shipping and MIRC 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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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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