Correlation Between Mega Financial and Plastron Precision

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

Diversification Opportunities for Mega Financial and Plastron Precision

0.01

Correlation Coefficient

Mega Financial  Plastron Precision

Significant diversification

The 3 months correlation between Mega and Plastron is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Mega Financial Holding and Plastron Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastron Precision 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 Plastron Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastron Precision has no effect on the direction of Mega Financial i.e., Mega Financial and Plastron Precision go up and down completely randomly.

Pair Corralation between Mega Financial and Plastron Precision

Assuming the 90 days trading horizon Mega Financial Holding is expected to generate 0.76 times more return on investment than Plastron Precision. However, Mega Financial Holding is 1.31 times less risky than Plastron Precision. It trades about -0.01 of its potential returns per unit of risk. Plastron Precision Co is currently generating about -0.12 per unit of risk. If you would invest  3,890  in Mega Financial Holding on October 25, 2024 and sell it today you would lose (20.00) from holding Mega Financial Holding or give up 0.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Mega Financial Holding  vs.  Plastron Precision Co

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.

Plastron Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plastron Precision Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Mega Financial and Plastron Precision

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

The idea behind Mega Financial Holding and Plastron Precision Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.