Correlation Between Mega Financial and HOYA Resort

Can any of the company-specific risk be diversified away by investing in both Mega Financial and HOYA Resort 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 Mega Financial and HOYA Resort into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mega Financial Holding and HOYA Resort Hotel, you can compare the effects of market volatilities on Mega Financial and HOYA Resort 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 Mega Financial with a short position of HOYA Resort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mega Financial and HOYA Resort.

Diversification Opportunities for Mega Financial and HOYA Resort

-0.68

Correlation Coefficient

Mega Financial  HOYA Resort

Excellent diversification

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

Pair Corralation between Mega Financial and HOYA Resort

Assuming the 90 days trading horizon Mega Financial Holding is expected to generate 0.33 times more return on investment than HOYA Resort. However, Mega Financial Holding is 3.02 times less risky than HOYA Resort. It trades about 0.04 of its potential returns per unit of risk. HOYA Resort Hotel is currently generating about 0.01 per unit of risk. If you would invest  3,224  in Mega Financial Holding on October 6, 2024 and sell it today you would earn a total of  616.00  from holding Mega Financial Holding or generate 19.11% return on investment over 90 days.

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

Mega Financial Holding  vs.  HOYA Resort Hotel

Mega Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mega Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mega Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

HOYA Resort Hotel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HOYA Resort Hotel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, HOYA Resort showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mega Financial and HOYA Resort

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

The idea behind Mega Financial Holding and HOYA Resort Hotel 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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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.