Correlation Between AJ Plast and Mega Lifesciences

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

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

Diversification Opportunities for AJ Plast and Mega Lifesciences

0.45

Correlation Coefficient

AJ Plast  Mega Lifesciences

Very weak diversification

The 3 months correlation between AJ Plast and Mega is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding AJ Plast Public and Mega Lifesciences Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mega Lifesciences Public and AJ Plast 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 AJ Plast Public are associated (or correlated) with Mega Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mega Lifesciences Public has no effect on the direction of AJ Plast i.e., AJ Plast and Mega Lifesciences go up and down completely randomly.

Pair Corralation between AJ Plast and Mega Lifesciences

Assuming the 90 days horizon AJ Plast Public is expected to generate 1.69 times more return on investment than Mega Lifesciences. However, AJ Plast is 1.69 times more volatile than Mega Lifesciences Public. It trades about 0.13 of its potential returns per unit of risk. Mega Lifesciences Public is currently generating about -0.12 per unit of risk. If you would invest  218.00  in AJ Plast Public on December 30, 2024 and sell it today you would earn a total of  18.00  from holding AJ Plast Public or generate 8.26% return on investment over 90 days.

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

AJ Plast Public  vs.  Mega Lifesciences Public

AJ Plast Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days AJ Plast Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Mega Lifesciences Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mega Lifesciences Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Mega Lifesciences is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with AJ Plast and Mega Lifesciences

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

The idea behind AJ Plast Public and Mega Lifesciences Public 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.