Correlation Between Elin Electronics and Megastar Foods

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

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

Diversification Opportunities for Elin Electronics and Megastar Foods

0.54

Correlation Coefficient

Elin Electronics  Megastar Foods

Very weak diversification

The 3 months correlation between Elin and Megastar is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Elin Electronics Limited and Megastar Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megastar Foods and Elin Electronics 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 Elin Electronics Limited 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 Elin Electronics i.e., Elin Electronics and Megastar Foods go up and down completely randomly.

Pair Corralation between Elin Electronics and Megastar Foods

Assuming the 90 days trading horizon Elin Electronics Limited is expected to under-perform the Megastar Foods. In addition to that, Elin Electronics is 1.04 times more volatile than Megastar Foods Limited. It trades about -0.23 of its total potential returns per unit of risk. Megastar Foods Limited is currently generating about -0.02 per unit of volatility. If you would invest  22,603  in Megastar Foods Limited on December 25, 2024 and sell it today you would lose (1,502) from holding Megastar Foods Limited or give up 6.65% of portfolio value over 90 days.

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

Elin Electronics Limited  vs.  Megastar Foods Limited

Elin Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elin Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Elin Electronics and Megastar Foods

The main advantage of trading using opposite Elin Electronics and Megastar Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elin Electronics 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 Elin Electronics Limited 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.