Correlation Between MIRC Electronics and Tips Music

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

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

Diversification Opportunities for MIRC Electronics and Tips Music

-0.68

Correlation Coefficient

MIRC Electronics  Tips Music

Excellent diversification

The 3 months correlation between MIRC and Tips is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding MIRC Electronics Limited and Tips Music Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tips Music Limited and MIRC 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 MIRC Electronics Limited are associated (or correlated) with Tips Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tips Music Limited has no effect on the direction of MIRC Electronics i.e., MIRC Electronics and Tips Music go up and down completely randomly.

Pair Corralation between MIRC Electronics and Tips Music

Assuming the 90 days trading horizon MIRC Electronics Limited is expected to under-perform the Tips Music. In addition to that, MIRC Electronics is 1.1 times more volatile than Tips Music Limited. It trades about -0.11 of its total potential returns per unit of risk. Tips Music Limited is currently generating about -0.11 per unit of volatility. If you would invest  90,910  in Tips Music Limited on September 3, 2024 and sell it today you would lose (5,005) from holding Tips Music Limited or give up 5.51% of portfolio value over 90 days.

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

MIRC Electronics Limited  vs.  Tips Music Limited

MIRC Electronics

Risk-Adjusted Performance

0 of 100

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 conflicting 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.

Tips Music Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tips Music Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Tips Music unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MIRC Electronics and Tips Music

The main advantage of trading using opposite MIRC Electronics and Tips Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MIRC Electronics position performs unexpectedly, Tips Music 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 Tips Music will offset losses from the drop in Tips Music's long position.

The idea behind MIRC Electronics Limited and Tips Music 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.