Correlation Between Mega Financial and Power Wind

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

Diversification Opportunities for Mega Financial and Power Wind

-0.28

Correlation Coefficient

Mega Financial  Power Wind

Very good diversification

The 3 months correlation between Mega and Power is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mega Financial Holding and Power Wind Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Wind Health 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 Power Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Wind Health has no effect on the direction of Mega Financial i.e., Mega Financial and Power Wind go up and down completely randomly.

Pair Corralation between Mega Financial and Power Wind

Assuming the 90 days trading horizon Mega Financial is expected to generate 1.39 times less return on investment than Power Wind. But when comparing it to its historical volatility, Mega Financial Holding is 1.42 times less risky than Power Wind. It trades about 0.08 of its potential returns per unit of risk. Power Wind Health is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,500  in Power Wind Health on September 12, 2024 and sell it today you would earn a total of  200.00  from holding Power Wind Health or generate 1.74% return on investment over 90 days.

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

Mega Financial Holding  vs.  Power Wind Health

Mega Financial Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mega Financial Holding are ranked lower than 3 (%) 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.

Power Wind Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Wind Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Mega Financial and Power Wind

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

The idea behind Mega Financial Holding and Power Wind Health 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.