Correlation Between Mega Financial and Central Reinsurance

Can any of the company-specific risk be diversified away by investing in both Mega Financial and Central Reinsurance 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 Central Reinsurance 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 Central Reinsurance Corp, you can compare the effects of market volatilities on Mega Financial and Central Reinsurance 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 Central Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mega Financial and Central Reinsurance.

Diversification Opportunities for Mega Financial and Central Reinsurance

0.67

Correlation Coefficient

Mega Financial  Central Reinsurance

Poor diversification

The 3 months correlation between Mega and Central is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Mega Financial Holding and Central Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Reinsurance Corp 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 Central Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Reinsurance Corp has no effect on the direction of Mega Financial i.e., Mega Financial and Central Reinsurance go up and down completely randomly.

Pair Corralation between Mega Financial and Central Reinsurance

Assuming the 90 days trading horizon Mega Financial is expected to generate 3.63 times less return on investment than Central Reinsurance. But when comparing it to its historical volatility, Mega Financial Holding is 1.23 times less risky than Central Reinsurance. It trades about 0.08 of its potential returns per unit of risk. Central Reinsurance Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,575  in Central Reinsurance Corp on December 21, 2024 and sell it today you would earn a total of  270.00  from holding Central Reinsurance Corp or generate 10.49% return on investment over 90 days.

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

Mega Financial Holding  vs.  Central Reinsurance Corp

Mega Financial Holding

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mega Financial Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Central Reinsurance Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Central Reinsurance Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Central Reinsurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mega Financial and Central Reinsurance

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

The idea behind Mega Financial Holding and Central Reinsurance Corp 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 CEOs Directory module to screen CEOs from public companies around the world.