Correlation Between APEX International and Mega Financial

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

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

Diversification Opportunities for APEX International and Mega Financial

-0.23

Correlation Coefficient

APEX International  Mega Financial

Very good diversification

The 3 months correlation between APEX and Mega is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding APEX International Financial 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 APEX International 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 APEX International Financial 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 APEX International i.e., APEX International and Mega Financial go up and down completely randomly.

Pair Corralation between APEX International and Mega Financial

Assuming the 90 days trading horizon APEX International Financial is expected to under-perform the Mega Financial. In addition to that, APEX International is 2.43 times more volatile than Mega Financial Holding. It trades about -0.22 of its total potential returns per unit of risk. Mega Financial Holding is currently generating about -0.18 per unit of volatility. If you would invest  4,015  in Mega Financial Holding on September 26, 2024 and sell it today you would lose (105.00) from holding Mega Financial Holding or give up 2.62% of portfolio value over 90 days.

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

APEX International Financial  vs.  Mega Financial Holding

APEX International

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with APEX International and Mega Financial

The main advantage of trading using opposite APEX International and Mega Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APEX International 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 APEX International Financial 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.