Correlation Between Mrs Bectors and Megastar Foods

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

By analyzing existing cross correlation between Mrs Bectors Food and Megastar Foods Limited, you can compare the effects of market volatilities on Mrs Bectors and Megastar Foods 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 Mrs Bectors with a short position of Megastar Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mrs Bectors and Megastar Foods.

Diversification Opportunities for Mrs Bectors and Megastar Foods

0.29

Correlation Coefficient

Mrs Bectors  Megastar Foods

Modest diversification

The 3 months correlation between Mrs and Megastar is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mrs Bectors Food and Megastar Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megastar Foods and Mrs Bectors 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 Mrs Bectors Food are associated (or correlated) with Megastar Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megastar Foods has no effect on the direction of Mrs Bectors i.e., Mrs Bectors and Megastar Foods go up and down completely randomly.

Pair Corralation between Mrs Bectors and Megastar Foods

Assuming the 90 days trading horizon Mrs Bectors Food is expected to under-perform the Megastar Foods. But the stock apears to be less risky and, when comparing its historical volatility, Mrs Bectors Food is 1.45 times less risky than Megastar Foods. The stock trades about -0.06 of its potential returns per unit of risk. The Megastar Foods Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  22,155  in Megastar Foods Limited on December 27, 2024 and sell it today you would lose (1,681) from holding Megastar Foods Limited or give up 7.59% of portfolio value over 90 days.

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

Mrs Bectors Food  vs.  Megastar Foods Limited

Mrs Bectors Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mrs Bectors Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Megastar Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Megastar Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Megastar Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mrs Bectors and Megastar Foods

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

The idea behind Mrs Bectors Food and Megastar Foods Limited 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.