Correlation Between Newretail and Mega Financial

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

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

Diversification Opportunities for Newretail and Mega Financial

0.56

Correlation Coefficient

Newretail  Mega Financial

Very weak diversification

The 3 months correlation between Newretail and Mega is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Newretail Co and Mega Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mega Financial Holding and Newretail 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 Newretail Co are associated (or correlated) with Mega Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mega Financial Holding has no effect on the direction of Newretail i.e., Newretail and Mega Financial go up and down completely randomly.

Pair Corralation between Newretail and Mega Financial

Assuming the 90 days trading horizon Newretail Co is expected to generate 5.48 times more return on investment than Mega Financial. However, Newretail is 5.48 times more volatile than Mega Financial Holding. It trades about 0.24 of its potential returns per unit of risk. Mega Financial Holding is currently generating about 0.04 per unit of risk. If you would invest  1,400  in Newretail Co on September 12, 2024 and sell it today you would earn a total of  1,050  from holding Newretail Co or generate 75.0% return on investment over 90 days.

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

Newretail Co  vs.  Mega Financial Holding

Newretail

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Newretail Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newretail showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Newretail and Mega Financial

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

The idea behind Newretail Co and Mega Financial Holding 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 Global Correlations module to find global opportunities by holding instruments from different markets.